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If you run a digital marketing business, you may wish to receive payment through a commission structure. This could mean that when your marketing efforts gain a lead for your client, you are paid a commission from that lead.

This payment structure is advantageous as it means that you will be rewarded for all of the hard work you put into your business. Further, it can be attractive to your clients, as they will only have to pay you when you have achieved specific targets. However, you must have terms and conditions in place that set out how you will receive payment through commission. If not, you might struggle to get paid. This article explains what to include in your terms and conditions to ensure your clients pay your commission.

It is crucial to be sure that you are not considered an employee of your company. If so, there are restrictions on when employers can pay their employees commission only.

What Are Terms and Conditions?

Your terms and conditions is a document which will set out the rights and obligations of both you and your clients. Here, you will need to set out the method of how they will pay you. Several clauses will detail this. If your clients breach any of these clauses, you might be able to make a claim of compensation against them.

Further, if your clients fail to pay you as set out in your terms and conditions, you will have legal grounds to chase them up for it.

Services

Firstly, your terms and conditions should clearly outline what services your client has engaged you to provide. This should be detailed, and it may be helpful to reference other attachments or documentation that further outline the services you are offering. 

The terms and conditions should also allow you to vary the services and commission you have agreed upon. This gives you some flexibility if the needs of your client change, or if you realise that you have more services to offer. 

For example, if the price of Google Ads increases, including this clause means that you can charge more for your services.

Commission Fee

One of the most crucial clauses in your terms and conditions is that regarding the commission fee. Your terms and conditions should clearly outline:

  • how much commission you will receive;
  • how you calculate this; and 
  • which services you will receive a commission for.

You may choose to receive a base rate, with the commission on top if you hit specific targets. Alternatively, you can choose to receive payment based on the volume of work you complete. Either way, these targets or milestones should be documented. 

For example, will you be paid for leads that you have helped generate? Or, will you only be paid for leads that have become paying customers? This distinction should be clear, so you know when you will receive payment.

Payment Terms

Your terms and conditions should also outline the payment terms. These terms will describe how often your commission will be calculated and how often you will get paid. 

You must outline whether you will receive payment:

  • fortnightly;
  • monthly; or
  • quarterly.

You should also think about what will happen if your client does not make payments on time. Here, you can include a clause which allows you to stop performing the services and charge interest if your client does not pay you on time.

Records and Auditing

A key concern for many business owners getting paid on a commission-only basis is that your client will not tell you when you are entitled to commission. 

For example, if you receive payment when your digital marketing services result in a lead, how will you know how many leads you have generated?

Your terms and conditions should outline that your client agrees to keep proper finance and billing information to allow you to calculate your commission fee. This information should include: 

  • how many leads your services have generated; and 
  • the amount of revenue your client has earned as a result. 

Your terms and conditions should give you the right to audit your client’s records. Here, you can ensure they are paying you the correct commission fee. If you identify that they have not, your client should immediately pay you any outstanding amounts they owe.

Length of Agreement

Your terms and conditions should state how long you intend the agreement to go for. This could be for a set period of time, such as one year. Or, it could be an ongoing agreement where either party can terminate it at any time.

If the terms and conditions last for a set period of time, they should outline whether you can continue earning commission after the agreement has come to an end.

For example, this may be when your marketing services result in customers being acquired after your business relationship with the client has ended.

If you still wish to earn commission in this period, you should make this clear in the terms and conditions. 

Key Takeaways

Providing digital marketing services in exchange for commission can be beneficial for both you and your clients. If you are providing services on a commission-only structure, you must have terms and conditions in place to ensure you are paid correctly. Your terms and conditions should outline:

  • what services you are providing;
  • what your commission fee is;
  • how this fee is calculated; and
  • allow you to audit your client.

If you need assistance drafting terms and conditions with a commission payment structure, contact LegalVision’s commercial contracts lawyers on 1300 544 755 or fill out the form on this page.

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