Sales Commission Plan Agreement: How to Keep Ambiguities Away? Companies with a sales team, whether large or small, usually have sales commission plans to reward the performers. But, when the sales commission plan issloppy, vague, or poorly written, companies have to bear the brunt of their team’s anger. In worst cases, they may have to face a lawsuit.
Courts usually side with employees and, more often than not, the employees win the case. This mandates companies to have a clear plan in place. Companies have to honor what agreement they have in place. There could be different plans which can underpin a commission plan agreement. Companies should consider the pros and cons of different sales commission plans to choose the right one. Common pay plans include: 1. Individual sales commissions - Sales representatives can be paid commissions on the basis of individual transactions. This plan is highly rewarding for the most dedicated sales people. 2. High salary, low commissions, and vice versa - Keeping the salaries high and cutting down the commissions or vice versa could be an option. 3. A percentage of profit - Companies selling services often adopt this plan to pay their sales reps.
4. Commissions on hitting targets - Some companies set sales targets for each sales rep and pay certain commissions after the target is reached. Whatever plan a company follows, they must have a legally-reviewed sales commission agreement, signed off by their employees. Here are a few important points to pay attention to: * A comprehensive, documented sales commission plan A clear and well-written sales commission agreement should be a top priority for businesses. The agreement must include rates and modes of payment as well as advanced notice of any changes. A plan outlined by a professional and reviewed by a legal expert can help avoid any contract ambiguity. The document should be reviewed to ensure legal compliance and alignment with company’s strategic growth. * Well-defined terms of payment The plan must be clearly defined including points like a) when a sale can be considered for commissions, and b) when the earned commissions would be paid. Sales may be considered for commissions under any of these conditions: o After an upfront payment o Final release of payment o Booking of services, etc. Conditions must be outlined clearly so the sales reps can easily understand them. * Status of employment change The sales commission plan agreement should also include what will happen when an employee goes for a long vacation, is separated from the organization, or transitions to a nonsales role. Companies must review their plan every year to avoid any unpaid commission lawsuits and monetary damages. Source: - https://goo.gl/iJQDRK