We had a big fight recently that wasn't quite domains at war scale. We had a bunch of henchmen and mercenaries. The question comes up how do we split the loot? Do mercenaries get a share of the loot even though its not domains scale? Also with magic items do those count towards the share people would expect? Basically does the gold get split up including the items the party keeps, or do you only split up gold from stuff that is actually sold?
Magic items are generally reserved for the PCs. They can be given to henchmen and this will increase the henchmens' morale.
Other treasure should be split. Mercenaries who participated in a battle should get a share of the loot as per the rules of Domains at War. Remember that mercenaries are (by definition) not adventurers so from their perspective if they've fought, it's a battle and they'll expect spoils. The spoils may be much less, of course, if it's a small battle with little plunder.
In most cases, items that are valuable, but not sold, should still be counted as loot for purposes of totalling up value and determining who is owed what. The party can't get away with keeping everything for itself by not selling things. They can give away goods in kind. Again, just look at it from the mercenaries' perspective - fine wool cloaks, sticks of incense, captured animals, etc. are exactly the sort of thinks they'd *expect* to get if they were looting a city for plunder.
So if a battle ends and the loot is a lot of magic items but almost no goods/coins the mercenaries would still expect to just split the goods/coins with them?
In that rare instance where magic items were somehow more prevalent than coins and trade goods in a group that was travelling overland (since mercenaries won't come into the dungeon with you), your players essentially hit the "optimal situation jackpot" and should enjoy their freebie. Most of the time, though, you'll be lucky to find one magic item nestled among scads of other conventional plunder, and the system works well in those situations.
I agree and that's how I'd handle it as Judge.
From the point of view of the troops, it's just "a bad day of plunder". The average mercenary isn't going to even understand what most of the items do, or how much they are worth.
Keep in mind the key Autarch rule, of course, - every campaign is a law unto itself! So adjust as you see fit.