Every affiliate program eventually pays a commission on a payment that is later refunded. How you handle it decides whether partners trust your numbers. The good news is that most of the problem disappears with one setting: a hold period.
The three situations
A payment that earned a commission can be reversed in three ways:
- A full refund — the customer gets all their money back.
- A partial refund or credit — the customer gets some money back, for example after a downgrade mid-cycle.
- A chargeback (dispute) — the customer’s bank reverses the charge, and you may or may not win it back.
Each can happen before or after you have paid the commission. Before is easy. After is where trust is won or lost.
Hold commissions before they can be paid
A hold period makes a new commission wait — “pending” — before it can be approved and paid. If the payment is refunded during the hold, the commission is simply cancelled. Nothing was paid, so nothing has to be taken back.
Set the hold at least as long as your refund policy. With a 14-day money-back guarantee, a 30-day hold covers almost every refund, plus the time it takes for the refund to reach your billing system. Chargebacks can arrive later — card networks allow disputes well after a charge — so no hold catches all of them, but it catches the common case.
A rule can carry its own hold. If annual plans have a longer refund window than monthly ones, give annual commissions a longer hold.
Reverse in proportion
When a payment is partly refunded, take back the same share of the commission. A $100 payment that earned a $30 commission and then had $40 refunded should leave a $18 commission: the partner keeps 30% of what you kept.
Billing systems report partial refunds differently. In Stripe, a credit note against an invoice carries the credited amount; a refund on a charge carries the refunded amount. In Paddle, a refund is an adjustment to the transaction. Whatever the source, the rule should be the same: reduce the commission in proportion, and cancel it when the refund is full.
After the commission was paid
If a payment is refunded after its commission went out, you have three options:
- Net it against the next payout. Record a negative commission for the amount, and subtract it from the partner’s next payout. This is the most common approach and the fairest when the partner keeps referring.
- Absorb it. For small amounts, or partners you value, writing it off costs less than the conversation.
- Ask for it back. Rarely worth it except for large amounts or bad faith.
Whatever you choose, say it in your terms. Partners accept clawbacks they were told about; they resent surprises.
Chargebacks deserve their own look
A dispute is not always a refund. You may win it, in which case the money returns weeks later. Two reasonable policies:
- Treat an open dispute as a refund for the commission, and restore the commission if you win.
- Leave the commission alone unless you lose the dispute.
Repeated chargebacks from one partner’s customers are a fraud signal. Look at them together, not one by one.
Refunds as a fraud signal
A partner whose customers keep asking for refunds may be misrepresenting your product, or sending customers who sign up only to trigger a commission. Track the refund rate per partner. A rate well above your average is worth a conversation, and a pattern of refunds right after the hold expires is worth more than one.
A worked example
A customer referred by a partner pays $100 on May 1. The program pays 30% with a 30-day hold, so a $30 commission is pending until May 31.
- Refunded in full on May 10: the commission is cancelled before it was approved. Nothing was paid; nothing is owed.
- $40 refunded on May 10: the commission drops to $18, 30% of the $60 you kept, and is approved on May 31.
- Refunded in full on June 20, after the June 15 payout: the $30 was already paid, so a $30 negative entry is recorded. If the partner earns $120 in commissions for June, their next payout is $90.
The partner sees each of these as a line in their portal, with the reason, not just a changed total.
Make it visible
Partners should see refunded and reversed commissions in their portal, with the reason, not just a lower total. A line that says “Refunded by customer — commission reversed” ends most questions before they are asked.
A sensible default
- Hold every commission for 30 days, or longer than your refund window.
- Cancel a commission when its payment is fully refunded during the hold; reduce it in proportion for a partial refund.
- Net refunds that arrive after payout against the next payout.
- Treat lost chargebacks like refunds.
- Show every reversal to the partner with its reason.
- Watch refund rates per partner.
Handled this way, refunds stop being disputes and become bookkeeping.
Doing this in Affiligato
Every commission is held for your program’s hold days, or a rule’s own hold, before it is approved. Stripe credit notes, refunded charges, Paddle refund adjustments and Chargebee refunds reverse an unpaid commission in full or in proportion; a refund after payout becomes a negative commission that nets against the next payout. Partners see each reversal in their portal.
