Dealing With Split Commissions

Any thoughts that split commissions are not important to reps in certain industries can be put to rest based on recent conversation with reps.

“I’ve got 77 key engineering firms that I work with,” explains one rep that serves the construction industry. “I rarely see the spec credit given. It’s a wonder I stay involved. The fact is, I have great rapport with the engineers I call on and my efforts generally result in orders that I do receive credit for. But it remains a frustration that so many times I’ve done so much work on an order and no credit comes my way.”

Another rep who works with OEMs says, “Whether a split commission program is a problem or not, depends to a large extent upon the principal. If the arrangement is well-defined and communicated, then I won’t lose sleep over it. But then there are others. One principal that comes to mind doesn’t make me very happy. He has a requirement that we have to file an extensive engineering report to be considered for our share of the commission. We had a recent experience with this same principal involving work we did for an airport. We spent time chasing orders all over the place, from Minnesota to North Carolina. We were supposed to get some sort of destination commission but never got anything out of it. The major effect an experience such as this has is that next time, we’re not going to expend as much effort on that principal’s behalf as we did this time.”

He adds that some other companies have “defined split commission programs that are clearly spelled out. There are two- and three-way splits, and it’s so understandable you really don’t even have to think about it. You know that you’re going to be treated fairly. In the absence of such well-crafted programs, however, it’s difficult to pay commissions equitably for the rep and the principal who want to be responsible.”

In past issues of Agency Sales, independent manufacturers’ representatives have been urged to consider the following:

  • Written agreement — Get as much in writing as possible beforehand. Even if the subject is only touched upon during a conversation with a principal, it would be wise to follow up — in writing — confirming the details of that conversation. In addition, having a written provision included in the contract would go a long way toward addressing the concern.
  • Negotiation — Negotiate prior to the order. It’s after the fact that things get much more difficult.
  • According to Gerry Newman, Schoenberg, Fisher, Newman & Rosenberg, Ltd., an attorney familiar with rep law, “Before signing it’s always wise to run your agreement with your principal by your attorney. And if split commissions are expected, it’s best to have them negotiated prior to agreeing to take on the line.”
  • Communication — If you know beforehand that an order is coming down that may call for split commissions, it’s imperative to communicate with the principal as soon as possible. Inform him of the extent of the work you’ve done, even though the order is formally being placed from another location. If you wait, you may find that you wind up with a smaller part of the commission — or nothing at all.
  • Reaction — Remember that your principal isn’t going to change everything just for you. As a result, it’s important to react in a professional manner; let him know all the details of a given situation and urge him to work with you on it.

Editor’s Note: We’d love to hear feedback from reps and from manufacturers who have to deal with the problem of split commissions. Let us know what works and what doesn’t, what’s fair and what isn’t. E-mail to:

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