Sales Commission Agreement India

Sales Commission Agreement in India: Understanding the Essentials

A sales commission agreement is a legal document between an employer and an employee, laying out the terms and conditions for the payment of commission to the employee on successful sales. It acts as a safeguard for both parties, ensuring that the salesperson is rewarded for their efforts, and the employer is not taken advantage of.

In India, sales commission agreements are governed by the Indian Contract Act, 1872, and the Payment of Wages Act, 1936. These acts lay out the legal requirements for such agreements, which must be adhered to by both parties.

Essential Elements of a Sales Commission Agreement in India

1. Identification of parties: The sales commission agreement should clearly identify the employer (the company) and the employee (the salesperson) involved in the agreement.

2. Commission structure and payment terms: The agreement should specify the commission structure, the percentage or amount of commission payable on each sale, and the frequency of payment (e.g., monthly, quarterly, or annually).

3. Sales targets: The agreement should define the sales targets that the employee is required to achieve to be eligible for commission. This could be measured in units sold or revenue generated.

4. Termination clause: The agreement should outline the conditions under which the agreement can be terminated by either party. This could include failure to achieve sales targets or breach of contract.

5. Confidentiality and Non-Disclosure: The agreement should include a confidentiality and non-disclosure clause to prevent the employee from sharing sensitive information about the company or its clients.

6. Intellectual Property: If the salesperson is required to create any intellectual property, such as marketing materials or sales presentations, the agreement should specify that the employer owns this intellectual property.

7. Jurisdiction: The agreement should define the jurisdiction in which the agreement is governed and any disputes will be resolved.

Why is a Sales Commission Agreement in India Important?

A well-drafted sales commission agreement is important for both the employer and employee. For the employer, it ensures that sales targets are met, and the company is not overpaying for underperformance. For the employee, it provides clarity regarding the terms of their commission, protects their interests, and incentivises them to perform well.

In addition, a sales commission agreement can be used to resolve any disputes that may arise between the employer and employee. It outlines clear terms and conditions for the payment of commission, which can be referred to in case of any disagreements.


In conclusion, a sales commission agreement in India is an essential document that protects the interests of both the employer and employee. It outlines the terms and conditions for the payment of commission and acts as a safeguard against disputes and misunderstandings. A well-drafted agreement can ensure that both parties are satisfied and can focus on achieving sales targets.