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Commission only roles are popular in many different industries, but it is important as an employer to understand your obligations so as to pay correct entitlements to your employees and contractors. If you pay incorrect salaries or wages, you may be required to pay back-pay to the employee and fines as set out in the Fair Work Act 2009 (Cth).

If you are planning on employing workers on a commission only basis, there are a couple of issues that you need to consider. Firstly, you need to consider whether your workers are contractors or employees. If your workers are considered to be employees, then you next need to confirm that the commission only structure will be allowed under employment law. Unless the commission structure is allowable under an Award, enterprise or register agreement then it will not be valid under employment law.

Relevant Awards

Two Awards currently allow for commission only structures, the Commercial Sales Award 2010, which covers Commercial Travellers, Merchandisers and Advertising Sales Representatives, and the Real Estate Industry Award 2010, which covers real estate workers.

You should review the coverage of these Awards to see whether your employee falls within these categories. You may also pay a commission only salary if your employee comes under an enterprise bargain or registered agreement that specifically allows for commission only structures.

Bonuses and Incentives

If you are looking to hire employees, then you must pay the worker either minimum wage requirements or the minimum requirements for any relevant Award, enterprise or registered agreements. The minimum wage will be increased by 2.4% (see link) so you should keep this in mind when working out the applicable wage. You can, of course, pay commissions, incentives or bonuses for employees on top of their base salary. However, this cannot replace the employees’ actual salary.

Piece Rates

Similarly to commission only structure, wage payments via piece rates, are only allowable if specified under an award, enterprise or registered agreement. One other exception is if the employer and employee have a written agreement that sets out that the employee receives payment for each product made or picked, then this structure is allowable. If you have this arrangement in place, you should ensure that you have a written copy of the agreement on file and that the employee also keeps a copy.

Commission Only Structures and Independent Contractors

In the alternative, you may consider hiring your workers on a commission payment basis as contractors. If you would like to do this, you need to be sure that you these workers are genuine contractors and that you are not setting up a sham contract. An employment lawyer can advise you as to the legality of your proposed employment scheme.

Key Takeaways

Once you decide what the best approach is when deciding on how to bring someone on to work for you, you will likely require some sort of agreement, either an employment agreement or contractor agreement that outlines the commission payment structure. If you have questions about commission structures and how you should set it up for your business, give LegalVision a call on 1300 544 755, and we can advise you on the law and assist with the relevant documents.

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