Commission Agreement Philippines: Everything You Need to Know

A commission agreement is a legal contract between two parties, wherein one party agrees to pay the other party a certain percentage of the sales or revenue generated from a particular product or service. In the Philippines, commission agreements are commonly used in industries such as real estate, insurance, and sales.

If you are planning to enter into a commission agreement in the Philippines, here are some key things you need to know:

1. Requirements for a Valid Commission Agreement

A commission agreement in the Philippines should be in writing and signed by both parties. It should indicate the percentage of commission to be paid, the duration of the agreement, and the specific products or services that will be covered. The agreement should also clearly state the responsibilities of each party and any obligations or restrictions that may apply.

2. Commission Rates

The percentage of commission to be paid is a crucial part of the commission agreement. It is usually negotiable and depends on the type of product or service being sold. The average commission rate in the Philippines ranges from 3% to 10%, but can be higher for luxury items or high-value sales.

3. Payment of Commission

The commission payable under the agreement should be clearly stated, as well as the payment schedule. It is important to note that under Philippine law, commissions earned by sales agents or brokers cannot be withheld for more than one month after the sale is made. Failure to pay commissions on time can result in legal disputes or damages.

4. Termination of Agreement

The commission agreement should specify the grounds for termination and the notice period required. It is important to note that under Philippine labor laws, sales agents or brokers who have been engaged in a commission-based arrangement for six months or more are presumed to be regular employees and are entitled to certain benefits and protections.

5. Legal Validity of Commission Agreements

Commission agreements are legally binding in the Philippines, provided they meet the requirements under the Civil Code and other relevant laws. However, it is advisable to seek legal advice before entering into any agreement to ensure that your rights and interests are protected.

In conclusion, commission agreements can be a valuable tool for businesses in the Philippines to incentivize sales and increase revenue. However, it is important to ensure that the agreement is properly drafted and meets all legal requirements. Working with an experienced lawyer or legal professional can help ensure that your interests are protected and that your agreement is legally valid.