What Is Commission Agreement?
Employees are paid in different ways from salary, hour or commission. At the early someone is accepted to work with a company or an employer, there will be a commission agreement before the employee starts the first day. In this agreement, the employee will sign agreement details related to the payment method and the number of the salary. Therefore, company and employee knows what to expect.
When To Use The Commission Agreement?
The document is used when you are hiring new employees you need to set how the commission or payment will be done.
When you are being hired you need to have this document to make sure the rights and obligation are documented.
So basically this document is a contract of a work paid which is very helpful for employer and employee. There are terms and condition will be included in the agreement. Besides, having this document will benefit the employee if there is a misunderstanding in the future. Additionally, employers can protect their business for future dispute.
In writing the commission agreement, there is some basic knowledge you have to underline because not all employee and contractor can use the same agreement.
Independent Contractors VS Employees
The type of document depends on the relationship between your employee and business. For example, if the sales representative you hired is your employee, then you should use the employer-employee sales commission agreement. Meanwhile, for the independent contractor, you can use a contractor sales agreement.
Keep in mind that using the right document is important because it is related to a tax representative. For example, each payment to the employee should be subtracted for tax, but this doesn’t apply to the independent contractor.
Furthermore, Writing the commission agreement should include the following elements:
When Is The Commission Delivered? – State it clearly when the commission is earned. How many times in a month if it is a salary when the commission will be paid and so on.
Some consequences of cancellations, refunds and payment default – Certain cases such as hiring sales as an employee might be very tricky. In the marketing world, sometimes there are a number of events that cancels the order which will affect the revenue. In this case, your agreement should be updated and mention any kind of details.
The commission formula – Detail aspect of the commission should be mentioned properly. It doesn’t only mention the exact amount of a salary, but it should take another agreement including a bonus of generating more customers.
What Are The Types Of Commission Agreement
There are several types of agreement which will depend on the position of your partner whether they are the employees or marketers.
Payment for Territory Volume – If you are working in a team, this type of payment will be suitable. However, you need to know your target more so you can decide the best strategy.
Profit Margin Sharing – Some companies will pay by percentage of the profit. Usually, this applies to a company who sells services.
Retail – The commission is based on the company net profits.
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