Are Commission-Only Contracts Legal
Under the Fair Work Act 2009, it is generally unlawful for an employee to be paid on a 'commission-only' basis.
Apart from a very small number of specific exceptions (see below), employees who receive a commission must still have their wages 'topped-up' to at least the national minimum wage (if they are Award-free) or their applicable Modern Award classification payrate (if they are Award-Covered) if they don't earn the equivalent amount in commission.
For example, if an employee is covered by a Modern Award that states they must be paid $700 per week, and the employee only earns commissions that total $600 in a week, the employer must generally top-up their pay by $100.
One specific exception to the above prohibition against commission-only contracts is for employees covered by the Real Estate Industry Award. Under this Modern Award, some categories of employee may be employed on a commission-only basis. However, it is very important to note that the Award contains a set of strict criteria that must be met before a person can be employed on this basis. Put another way, just because a person is covered by this Award, it does not mean they can automatically be paid on a commission-only basis.
Even if a person can be paid on a commission-only basis under this Award, there are even further restrictions imposed by the Award to ensure they receive no less then a set percentage of each closed sale.
Need help with HR?
Looking for a conference speaker
Looking for an expert opinion for media
Who is Workforce Guardian and how do we help employers manage HR and compliance?