Commission-based pay

What it means

Commission-based pay is a form of remuneration in which wages are set as a share of sales, profit or the volume of deals closed. It is typical for salespeople, estate agents and sales representatives, whose results are well captured by the volume they sell.

The Labour Code recognises it as one form of pay alongside time-based and piece-rate pay. It is often combined with a basic time wage so the employee has a secure income even in a weak month, with the share acting as the variable part. The principle resembles the commission paid to commercial agents.

Crucially, even under purely commission-based pay the employee may not receive less than the minimum wage or the minimum wage entitlement for their level of job difficulty. If the month's share falls short, the employer must make up the difference.

How it works in practice

The rules must be set out precisely in the employment contract or pay policy: what the share is calculated from, at what percentage, when entitlement arises, for example on signing the contract or only when the invoice is paid, and what happens if a deal is cancelled. Vague rules are a frequent source of disputes when an employee leaves.

When calculating compensation such as holiday pay, commission feeds into average earnings. Fluctuating income therefore affects the amount of compensation, which the employer must factor into cost planning and the payroll accountant into the calculation.

It is wise to add qualitative criteria so that salespeople do not sell at any price. Combining the share with bonuses for customer satisfaction, payment discipline or margin helps prevent discounts that boost turnover but cut profit.

What to watch out for

If the share depends on invoices being paid and the employee leaves, it must be clear whether they are owed commission on deals closed before leaving that the customer pays later. Without a contractual clause, such claims often end up in court.

Commission is subject to contributions and tax like any other wage. Trying to pay part of it outside payroll, for example through invoices from a trade licence for what is in fact dependent work, risks reclassification as disguised employment with back contributions and fines.