What a commission clawback is, and how to do it fairly.
A commission clawback takes back commission already earned or paid when the revenue behind it does not arrive or is returned, most often after a refund, a cancelled contract or a failed payment. It is the part of a sales commission clawback policy nobody wants to use and every team needs written down. This guide covers why clawbacks exist, three fair ways to handle one, which model to put in your plan, and how LetSign runs them from Stripe.
Why clawbacks exist.
Commission is paid on revenue. When the revenue reverses, the commission has to follow, or the business pays twice: once to the client and once to the rep. Three made-up examples, each at a 10% rate.
Refunds
A client pays $4,000 and is refunded in full two weeks later. The rep was paid $400 on money the business handed back. The clawback returns the $400, which is the refund commission rule at its simplest: commission follows the net revenue.
Cancellations inside a vesting window
A twelve-month contract worth $6,000 pays $600 on booking, with a 90-day cliff. The client cancels on day 40. The $600 comes back because the deal did not survive the window the plan set.
Payments that never arrive
A $1,500 invoice earns $150 on signature. The card fails, the retries fail, and the deal churns. Nothing was collected, so the $150 comes back, unless you decide the failure was not the rep's doing.
Three ways to handle one.
Deduct it from the next pay period
The default. The clawback is a negative line on the rep's next statement, netted against new earnings. A rep with $2,200 earned in October and a $400 clawback from a September refund is paid $1,800. If the next period is too small to cover it, the balance carries forward.
Waive it when the loss was not the rep's doing
A card that expired, a client that closed its doors, a bank that blocked the charge. The rep sold the deal and the client meant to pay. Waiving a $150 clawback costs you $150 and keeps a rep who did the job. Record the waiver so the statement shows why.
Split or stagger it when the deal ran for part of its term
A twelve-month contract at $500 a month churns after five months. The rep was paid $600 on booking. Five twelfths of the term ran, so $250 stays with the rep and $350 is clawed back. Proportional vesting does this arithmetic for you; staggered steps do a rounder version of it in fixed stages.
Write it into the plan before you need it.
A clawback policy argued about after the refund is a dispute. One written into the plan before the first deal is arithmetic. Pick one model for the workspace and apply it to every deal. These are the five models a LetSign plan offers, and when each fits.
| MODEL | WHEN IT FITS |
|---|---|
| Proportional vesting | Subscriptions and retainers. Commission vests with each month that runs, so a churned deal claws back only the share of the term that never happened. |
| Cliff (a window in days) | Trial periods and money-back guarantees. Cancel inside the window, say 30 or 90 days, and the whole commission comes back. Outside it, nothing does. |
| Linear over the term | Annual contracts paid up front. The clawback shrinks a little every day of the term, so a cancellation in month eleven costs the rep very little. |
| Staggered steps | Teams that want round numbers. Fixed stages, for example all of it back in the first quarter, half in the second, nothing after that. |
| None | One-off projects already delivered, or plans that pay only on cash collected and never on booking, where there is nothing left to vest. |
Whichever you choose, state it in the rep agreement and in the commission plan, in the same words. How the rest of the plan fits together, rates, basis and caps, is covered in how to structure a sales commission plan.
How LetSign does it.
LetSign reads refunds and disputes from your own Stripe account, on each webhook and again nightly. A refund or dispute claws the commission back under the rule in your plan, in proportion for a partial refund: refund $1,000 of a $4,000 payment and a quarter of the commission comes back.
A deal that churned because a payment failed does not go straight to a clawback. It lands in a churn exceptions queue, apart from clients who chose to leave, and you can waive the clawback in one step. What Stripe does with the card in the meantime is in when a Stripe subscription payment fails.
If the period is already paid and frozen, the clawback becomes a commission adjustment in the next open period. Adjustments are append-only: nothing is edited or deleted, so a mistake is corrected with a counter-adjustment and the statement shows both lines.
All of this is part of commission tracking on the Team plan, at $19 per seat per month. A rep is a seat; clients and signers never are. The full rules are on the pricing page.
Frequently asked questions
Is a commission clawback legal?
In general it depends on the employment contract or rep agreement and on local law, which treat earned commission differently from place to place. The practical rule is to put the clawback terms in writing before the first deal: the model, the window and how a clawback is collected. This guide is general information, not legal advice, so check the rules where your reps work.
What if the rep has already left?
There is no next pay period to deduct from, so the clawback becomes a balance the rep owes under their agreement. Many teams write a final-settlement clause that holds the last payout for the length of the clawback window. In LetSign the clawback still posts as an adjustment against the rep, so the ledger shows what is outstanding.
What if the refund is partial?
Claw back the matching share, not the whole commission. A $1,000 refund on a $4,000 payment at 10% claws back $100 of the $400 paid. LetSign reads the refund amount from Stripe and applies the plan's rule in proportion.
Should I claw back when a client's card fails?
Usually no. The rep closed the deal and the client meant to pay; the loss came from a card, not from the sale. LetSign flags failed-payment churn apart from voluntary churn, in a churn exceptions queue, so you can waive those clawbacks in one step and let the others run.
How do I tell a rep about a clawback?
Before the statement does. A short note that names the deal, the refund and the amount, and points to the rule in the plan, lands better than a surprise negative line. In LetSign the statement line names the proposal and the Stripe reference, so the rep can trace the clawback to the exact refund.
Write the rule once. Let the ledger apply it.
Start free, send your first proposals, and switch to Team the day you add a rep. Refunds, disputes and churn claw back under the rule you wrote, and you confirm every waiver.