You've worked deals for months. Your pipeline is loaded with opportunities about to close. Then comes the termination, whether your resignation or your employer's decision.
What happens to your commission?
According to industry research, variable compensation averages 20-30% of total pay for sales professionals. For many reps, that means $2,000-4,000 per month. Losing your commission rights could cost you a quarter of your annual earnings.
Here's your complete guide to your rights, and the contract traps to avoid.
In the United States, commission rights upon termination vary by state, but several principles apply broadly:
Employment Contracts Rule
Your written agreement determines most commission rights. Courts generally enforce clear commission terms, including when and how commissions are earned.
Earned vs. Unearned Commission
Most states distinguish between commission that's already "earned" (deal closed) and commission on pending deals. Once earned, commission is typically owed regardless of employment status.
State Wage Laws
Many states classify earned commission as wages. California, New York, Massachusetts, and others require timely payment of all earned wages upon termination, including commission.
SituationYour RightsTermination by employerFull commission on earned dealsVoluntary resignationFull commission on earned dealsGarden leave / Paid leaveTypically estimated commission based on historical averagePro-rata bonusDepends on contract terms and state law
Whether you resign or get fired, you're entitled to commission on deals that close during your notice period.
This applies even if your employer places you on garden leave. You can't be "punished" for being on leave by losing your commission.
When you're on garden leave, you can't close new deals. Your commission is calculated as an estimate.
Best practice calculation method:
Example:
If a reasonable estimate can't be made, look at the employee's historical commission over a longer period.
Real-time insight into your commission
With Prowi, sales reps can track their earnings live, including commission per deal and progress toward targets. This creates motivation and transparency.
This is where it gets interesting, and contentious.
What happens to deals you've worked on for months but that close after your last day?
Most commission disputes center on timing. Courts and contracts typically recognize three trigger points:
Your contract should specify which trigger applies. If it doesn't, courts often interpret ambiguity in favor of the employee.
Post-termination commission can add up quickly. Sales professionals who leave with a full pipeline often have $5,000-$15,000 or more in pending deals.
According to SHRM research, some court cases have resulted in awards of $50,000+ for unpaid post-termination commission, plus legal fees.
Commission TypeYour RightsAlready earned commissionFull payment by final paycheck or next pay dateCommission during notice periodFull commission or estimatePost-termination commission (pipeline)Depends on contract and when commission is "earned"Commission on canceled ordersTypically no right unless otherwise agreed
Your commission rights depend heavily on your contract. Here's what to watch for.
Some contracts include clauses like:
"Any commissions not credited before the employee's termination date will not be paid and will remain with the company."
This type of clause could mean you lose commission on deals you've worked on for months, simply because they close days after your last day.
Always negotiate for explicit post-termination commission rights.
Some agreements specify that commission is only earned when the customer pays, not when the order closes.
This could mean:
A clause stating you only receive bonus if employed on December 31 may be unenforceable in some states, especially for earned commission classified as wages.
Many companies still include such clauses, and many reps accept them without knowing they may be invalid.
Transparency builds trust
The more complex your compensation model, the more important it is that reps can follow along. Prowi provides real-time visibility into all components: commission, bonus, accelerators.
What happens if a customer cancels an order after you've been paid commission?
The general rule is shared risk. If you receive commission on a sale and the customer later cancels, your employer can often offset against future commission.
But after termination, it's different. According to legal experts at SHRM, employers cannot typically demand repayment of commission already paid, unless the contract clearly permits clawbacks.
Exception: If commission was paid based on an error (e.g., miscalculation), there may be a repayment claim.
The Situation:
Calculation:
*Assuming deals close within reasonable time and contract doesn't waive post-termination commission.
Yes. You're entitled to commission on all earned deals during your notice period, whether you resigned or were terminated.
You're entitled to estimated commission based on your average earnings. Typically calculated as the average of the past 12 months of commission.
It depends on your contract. If your contract waives post-termination commission and you've accepted it, enforcing your claim may be difficult. But certain clauses may be unenforceable depending on state law.
There's no fixed limit. It depends on when the deal started and what's "reasonable time" in your industry. General statutes of limitations (2-6 years) apply.
Many commission disputes arise because neither the rep nor the employer has clear visibility into what's earned and when.
With a system like Prowi, you have real-time insight into:
This makes it far easier to document your claim if disputes arise.
Ready to get real-time visibility into your commission?
Whether you use commission, bonus, or a combination, Prowi helps you make it transparent. Your reps can track their earnings in real-time, and you can see what drives performance.
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