Change is constant in business. But when you aren’t transparent about change with your team, rumors can damage morale. That’s especially true when it comes to changes in pay. If you handle this sensitive communication with care, you can keep your top reps from heading for the exit.
If you’re wondering where to start, you’re in the right spot. We’ll walk through what a change of commission letter is and when to use them.
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A change of commission letter is a way for companies to give sales teams written notice about pay changes. Businesses issue a letter to anyone affected when business needs shift and the organization adopts new commission structures. This letter typically includes new plan structures and goals, payout schedules, equity compensation, termination clauses, and more.
Sales commission plans change to reflect shifting business priorities, unstable market conditions, new product releases, and more. When these changes occur, sales leaders should provide reps with a written letter so they can understand the differences in their new compensation structure and its purpose.
The letter should typically be issued after a new decision is made — when all details are finalized. However, it should not come as a complete surprise to employees. You should plan to verbally communicate major changes with reps before issuing the written letter, so they know it’s coming and do not feel blindsided.
When your organization decides to change its compensation plan, you must write and issue letters to those affected. Beyond just explaining the new compensation plan, you should also prepare to cover the following components:
Letters are a necessary part of business operations for any sales organization. But when you make big changes — especially when they affect compensation — it’s important to address them with your sales team before you send a letter.
Because it can alter a sales rep’s strategy and affect compensation, organizations should aim to change plans as little and rarely as possible. Frequent changes can affect workflow, productivity, and employee morale. In my experience, the most often you should change a plan is once a year.
Taking the time to explain the new plan and reasons for the change helps organizations reduce the chances of sales reps leaving due to the new compensation structure. For example, you might explain that although your organization previously paid X amount, it’s no longer sustainable because the company needs more capital for a new product. Be sure to emphasize the positives, such as a new product or feature that lets sales representatives compete for bigger deals that pay more.
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Companies with straightforward compensation plans should use a basic letter format to make it easy for reps to understand. However, if you need to include complex details, you should provide clear explanations. There’s no one-size-fits-all for writing a letter, but a basic version might look something like this.
Dear [Salesperson’s name],
This letter is to inform you of changes to your compensation plan. The new plan will become effective on January 1, 2024.
[Give some context here about the reason for the change and new business goals. If it’s a lot of information, you may consider sending out a separate letter at the same time].
As a [sales representative] at [name of company], your compensation is based on these requirements [include role description or link to additional resources or performance metrics]. In addition to the expectations of your role, please be sure to read all applicable definitions related to your job [link to resource] to ensure comprehension before signing this document. If you have any questions, please reach out to your manager.
Here is a breakdown of your new commission plan:
I acknowledge that I have read this document, understand its contents, and agree to its terms.
Employee Signature: _____________________ Date: ______________
Supervisor Signature: _____________________ Date: ______________
It’s sometimes crucial for the health of your organization to change its compensation plans based on business priorities, financial goals, market conditions, and more. It’s equally important to be transparent and communicative about adjusting compensation structures with your teams. By writing a clear change of commission letter and taking the time to explain new goals, you create an opportunity to build a stronger relationship with your employees and strengthen your business at the same time.
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Scott Leese is the founder of Scott Leese Consulting. Armed with years of industry experience - and a proven track record of success - he focuses on a scalable approach to sales strategies, processes, people, and infrastructure. Scott is also a co-founder of Surf and Sales, a sales summit held in . Read More Costa Rica. He an author and a 3X American Association of Inside Sales Professionals Top 25 Award Winner.
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