How Should Employers Handle Commissions After Termination?

by Eric Dyches | Nov 2025

When an employee leaves—whether by choice or through termination—final pay can become a gray area, especially when commissions are involved. While each state has its own rules, one universal principle applies: employers must pay all compensation that has been earned and owed, including commissions, as defined by any existing agreements or written policies.

That’s why a clear, written commission agreement or offer letter isn’t just a formality—it’s protection. Without documented expectations, confusion often follows. Departing employees may believe they’ve earned commissions tied to pending deals or future revenue, while employers may see it differently. These misunderstandings can quickly escalate into disputes or even legal claims.

Setting Your Organization Up for Success

The best way to avoid commission-related headaches is through transparency and documentation. As you review your current practices, consider these key questions:

• How have commissions for departing employees been handled in the past?

• Have you unintentionally set a precedent that could influence future cases?

• Do you have a signed commission agreement or offer letter clearly outlining how commissions are calculated—and what happens if employment ends?

• Are there emails, policies, or communications that reference how commissions are treated post-termination?

• Does your employee handbook address final pay and commission payout expectations?

Answering these questions proactively helps ensure consistency, fairness, and legal compliance. It’s also smart to make this part of your onboarding process—clarifying commission structures upfront ensures employees fully understand how and when commissions are earned and paid.

The Bottom Line

Whether you’re creating a commission plan for the first time or updating an existing one, partner with HR and legal counsel to ensure compliance with both state and federal law.

At the end of the day, clarity today prevents conflict tomorrow. Clearly defining commission expectations not only protects your business—it builds trust and transparency with your team.

💡 Need help drafting or refining your commission policy? The ImpactHR team can help you create compliant, easy-to-understand agreements that protect your business and your employees.