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Sales Contracts - Are you reading the fine print? - Should commission on long term contracts that you close survive termination?

If you are working in a field where the company relies on selling long term contracts, have you seen no cause termination language where your commissions are cut off on the termination date as opposed to paying out the full commission value from the contracts you sold? If yes, how does that make you feel?


I was sent a contract agreement to review for a 90 day consulting project, with a clear mutual no cause termination clause which would sever the relationship immediately.


The company is a contract sales company built by sales experts that basically does outsourced biz dev work. They go after long term client contracts, with a preference for 12 month contracts at a range of $3-5k PM.


I was absolutely floored (and pretty pissed off) that a little further into the contract, there is another clause that states commissions will only be paid on the paid portion of the contract prior to the termination date (which is again, set up as we can terminate for any reason or no reason at all).


So let's say I sell 6 annual contracts averaging $4k PM (my commish is 10%) for $288k total value, and instead of me rightfully earning the $28.8k through my sales efforts, they decide to shaft me and not renew the contract and basically keep $20k that rightfully belongs to me.


Does anyone else find this highly egregious, or is it just me?




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6
TennisandSales
Politicker
3
Enterprise Account Executive
i would say this is common but not right.ย 

The last company i worked for, (publicย  Saas provider) paid out all commissions you were owed even after you left.ย 

So pretty much how it worked is i got the next quarters commission check since those were earned while i was working there.ย 
SaaSam
Politicker
2
Account Executive
Seems pretty par for the course.

It would be nice to get paid beyond termination but I doubt many companies do.
Oldskool
Praised Answer
0
Senior AE
So, that is ok with you? This is the way they do it, and so be it? Personally, I get viscerally angry when I see this clause, and I tell them to shove it up their cornhole.ย 

I want to raise awareness on this topic because people should be at least negotiating for a percentage of that trailing commission instead of just walking away from it.ย 
SaaSam
Politicker
3
Account Executive
It's not okay with me just because it's the status quo so much as because it makes sense to me.

I don't expect a company to continually pay me on a deal if I'm no longer employed there. Now, if I close something and then get fired before the commission pays out, that's a different story.

My current company pays the entire value of the contract up front regardless of whether or not the contract is for monthly payments or all upfront.

However, I don't see a problem with your point of view. Personally, I think best practices will draw in best talent. I applaud what you're suggesting and think any company that takes your position on the matter sounds like a great company that cares about their sales staff. But, I wouldn't discount a company for not handling it that way either.
Oldskool
Praised Answer
0
Senior AE
Good stuff, thanks for the input.ย 
AnchorPoint
Politicker
2
Business Coach
The contract can always be negotiated -- BEFORE you agree.ย  You cannot expect the company's contract to be in your favor.ย  Have an attorney review if there is something you do not understand and prepare to negotiate changes.ย ย 
Oldskool
Praised Answer
1
Senior AE
Exactly the point. A lot of sales persons don't even bother to read their contracts, let alone get a lawyer to do it, and redline the trash that is designed to cheat them in a dispute or termination. Given the lack of traction this post is getting, I don't hold out a lot of hope for change.ย 
jefe
Arsonist
1
Head of Sales
This seems normal for permanent, but iffy for a contract for the exact reason you stated. If it's short term, what's stopping them from cutting you off and running with the business?

For perm, there's investment from both sides.
Oldskool
Praised Answer
0
Senior AE
My argument is that sales should not put up with it. You should not even be able to write at will language into a contract with no provision for paying out on commissionable income on sold deals that are annualized, but paid on an MRR basis by the client.ย 
LordBusiness
Politicker
0
Chief Revenue Officer
This is pretty standard, given what happens if you sell a deal, leave and the client never pays or cancels - there is no way to recoup that commission for what is in essence a bogus deal.
Oldskool
Praised Answer
0
Senior AE
Caveat is that these are contracts with legally binding terms. Collections and legal are now the company's responsibility, not the sales person.ย 
salesdetroit
Opinionated
0
Director
I think it's really dependent on how revenue is recognized and paid out within the organization. For example, if it's recognized across the term of the contract and someone else will have to service the client throughout that term, the inheriting rep should be paid out the remaining commission.ย 
Oldskool
Praised Answer
0
Senior AE
In my line, that would be a dedicated account manager who is salaried, not commissioned. That said, I take your point.ย 
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