Friday 14 July 2017

Key Points To Include In A Sales Employment Contract

Drafting an employment contract is key to establishing a new employee’s role within your business. They dictate each party’s (you and the employee’s) respective rights and responsibilities.

These contracts are legally binding, and ensure any disputes can be settled outside of courts.
Sales staff contracts are, by nature, varied from other roles due to the nature of their work – for example, accounting for a commission or bonus structure unique to sales roles.

Fundamentally, these contracts outline what both parties’ expectations and duties are, ensuring a harmonious working relationship. To help create a great sales employment contract, here are the key points you should consider.

1. Confidentiality

Sales staff will have access to a wealth of company knowledge and sensitive data. A strong confidentiality clause is integral in protecting your business, and you can ensure that this is enforced long after the employee contract is terminated.

Non-disclosure agreements and soliciting requirements are also necessary to include, so the employee fully understands the importance of protecting the business and where the limits are. This section must be clear and easy to follow, yet thorough; you do not want loopholes.

2.  Restrictive Covenant Schedule

Restrictive Covenant Schedules retain the rights to all customers, clients, and contracts for your business – preventing ex-employees from poaching customers, interfering with transactions and damaging staff relations.

It is crucial you include this, and that you term it in a non-conditional manner.

3. Termination

While most employees will serve a notice period, this may not be advisable for sales staff whose continued access confidential information to can damage client and staff relationships.

Garden Leave and Pay in lieu of notice (PILON) are items to be considered when devising a sales contract, to prevent tragedy.

4. Probation.

Probation periods are an excellent way to test out new recruits; this can also work in their favour by offering a get-out if the job isn’t what they expected. In the event that a new employee isn’t able to deliver to your standards, these clauses allow you to dismiss them.

It is important to remember that everyone can have a run of bad form in sales and the probation period should take into account an establishing time as well as a period of unexpected bad fortune.

Points To Include In A Commission Plan and Sales Employment Contract

Great sales people are rare, and commission plans are the lifeblood of any sales team. For your sales team to have passion and belief in your product as much as you do, a compensation plan is a priority. 

While a commission plan is likely to be highlighted in the sales employment contract, it is wise to make the agreement as a side to the contract so it can be amended without the difficulties of changing an entire employment contract.

For both the commission plan and the employment contract it is important that this is legally compliant and legally reviewed to prevent your business breaching employment legislation.

Three Key Points

1. Keep Employment Contracts Simple and Goal Oriented

Make sure your agreement covers all necessary points that motivate sales staff and sells products. Different commission plans drive different behaviour so consider the objectives that your company want to focus on such as;

• New accounts
• More business on existing accounts
• New product line
• Ensuring customer loyalty
• Grow contract length
• Deal profitability

2. Allow Change

Commission agreements should be subject to change as the business sees fit, with all agreements it is wise to put the following clause in;

“The company reserve the right at any time, in its absolute discretion, to vary the amount of commission payable and/or to vary the terms of the commission arrangements and/or to withdraw the commission arrangements in their entirety upon giving one months’ notice.”

Remember that if there is any ambiguity or you do not have this clause in your agreements, then the courts will naturally side with the employee.

3. Confirm Timings

Commission payment needs to find a balance between keeping sales members motivated, and discouraging rushed transactions with disreputable companies.
When reimbursing customers, staff can pocket the commission while companies lose out - consider an appropriate recovery policy. These protect you from cancellation and non-payment, encouraging staff to pursue stable companies with secure credit.

Clearly determine when commission is granted, such as when;

• The order is booked
• It is shipped
• It is delivered
• You have received full payment.

With a clear timeline, it shows transparency to the agreement, and it is easy to calculate for all parties.

There are many different types of commission schemes to consider when drafting up sales employment contracts, so make sure you educate yourself and choose, and adapt, the most suitable.

For more information on attracting and recruiting sales staff have a browse on this blog, or head to our website.

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