Commission-Based Jobs in Australia: What Employers Need To Know

Commission-based jobs can be a smart way to motivate sales and align pay with results. If you’re growing a sales team or rewarding business development roles, a commission plan can help you drive revenue without locking in fixed costs you can’t sustain.

But getting commission arrangements wrong can be costly. Underpayments, unclear targets, and non-compliance with awards or superannuation rules can lead to disputes and penalties.

In this guide, we’ll walk through how to set up commission-based jobs in Australia from an employer’s perspective - including structure options, key legal rules, and the documents you’ll want in place before you go live.

What Are Commission-Based Jobs (For Employers)?

In a commission-based job, part (or all) of an employee’s pay depends on sales or other measurable outcomes. This is common in retail, real estate, SaaS and professional services where team members generate revenue.

Commission can be layered on top of a base salary, or - in limited scenarios - be the sole form of remuneration. The right model for your business depends on your industry, award coverage and risk appetite.

Common Commission Models

• Base + Commission: A fixed salary or hourly rate plus a variable commission. This is the most compliant and stable model for most employers.
• Commission-Only: Pay is entirely driven by sales results. This is high risk and only lawful in specific circumstances (for example, some real estate roles under certain awards). Always check award and minimum wage obligations first.
• Draw Against Commission: You advance a regular “draw” (like a retainer) that is offset against commissions earned over a period.
• Tiered Rates: Higher commission percentages kick in after the employee exceeds a sales threshold.
• Team or Split Commissions: Commission is shared across a team or between people who contributed to the sale.

Whichever model you choose, it’s essential to document exactly how commission is calculated, when it’s “earned”, and when it’s paid.

Should You Use Employees Or Contractors For Commission Work?

It’s common to consider commission-only contractors for flexibility. However, misclassifying a worker can create serious legal and financial risk (for example, backpay, leave, superannuation and penalties).

If the role looks and operates like employment - regular hours, control over how work is done, integration into your business, and no genuine ability to delegate - it likely is employment regardless of what the contract says. If you’re unsure, get tailored employee vs contractor advice before you hire.

If you decide to hire employees, set out the base terms in an Employment Contract and attach or incorporate a separate commission plan. For contractor arrangements, you should still have a clear, written commission structure and payment terms - but ensure the overall relationship genuinely supports contractor status.

How To Structure A Commission Plan (Step-By-Step)

A good commission plan is simple to read, easy to administer, and avoids grey areas that cause disputes. Here’s a practical framework you can follow.

1) Define The Objective And Metrics

Decide what you want to incentivise: closed revenue, gross margin, qualified leads, upsells, renewals, or team results.

Choose measurable metrics you can verify in your systems. For sales, this is often invoiced revenue collected, not just deals signed.

2) Set Eligibility And Territories

Spell out who’s eligible (role, probation status, part-time vs full-time) and any territories or account ownership rules. Clarify whether inbound sales, partner sales or online orders count, and how you handle conflicts.

3) Choose The Commission Formula

• Rate: Flat percentage or tiered rates linked to performance milestones.
• Base For Calculation: Invoice value, collected revenue, or margin.
• Accrual Logic: Is commission accrued per item, per contract, or per month?

Keep formulas unambiguous. If you sell subscriptions, clarify whether commission is paid on first year only or on each renewal.

4) Define When Commission Is “Earned”

This is vital. You might say commission is earned when payment is received, the customer is onboarded, or after a cooling-off period. Tie it to an event you can evidence and that aligns with cash flow.

5) Payment Timing, Clawbacks And Chargebacks

Explain the pay cycle (e.g. monthly in arrears) and whether you’ll adjust for refunds, cancellations, bad debt or churn. If you apply clawbacks, set a clear window (for example, clawback if a sale is refunded within 90 days).

6) Quotas, Thresholds And Caps

If you use quotas or accelerators, define them in the plan. Be transparent about any caps - and consider how caps might affect motivation and retention.

7) Leave, Probation And Part-Time Arrangements

Address how commission works during probation, annual leave, parental leave or part-time work. If performance is pro-rated, say so.

8) Post-Employment Sales

Clarify whether commission is payable after employment ends. Many employers pay commission only on sales earned as at the termination date, not on future renewals or pipeline deals, unless explicitly agreed.

9) Approvals And Discretion

Keep a limited, clearly defined discretion for genuine edge cases (for example, correcting errors). Avoid unlimited discretion that might undermine the enforceability of the plan.

10) Put It In Writing

Document the plan in a clear Employee Commission Agreement or policy that forms part of your employment terms. Use concise examples to show how calculations work.

It’s also a good idea to align the plan with your broader Commission Agreement framework for any non-employee sales partners (if applicable), so incentives don’t conflict.

What Laws Do You Need To Follow?

Commission-based pay touches several areas of Australian employment and commercial law. Here are the key issues to cover before launch.

Awards, NES And Minimum Entitlements

Check if a modern award applies to the role. Awards can set minimum rates, commission rules, allowances and hours of work. Even with high commissions, you must meet minimum entitlements under the National Employment Standards (NES) and any applicable award. For complex coverage questions, it’s worth reviewing your Modern Awards obligations before finalising pay structures.

Superannuation On Commissions

In many cases, commissions count as Ordinary Time Earnings (OTE) for superannuation. Ensure your payroll system calculates super correctly on commission payments to avoid underpayments. If you’re unsure, read up on Ordinary Time Earnings and your obligations around superannuation on bonuses and commissions.

Set-Off And Offsetting Minimums

Some employers use higher total remuneration to “set-off” award entitlements. If you’re doing this, include a carefully drafted clause in the employment contract and ensure the numbers actually cover the entitlements in practice. Poorly drafted clauses can be ineffective - see guidance on set-off clauses in employment contracts.

Record-Keeping And Payroll

Commission plans rely on accurate data. Keep clear records of sales, accruals and payments. Provide employees with itemised payslips that show commission separately and ensure your systems can produce a transparent audit trail.

Consumer Law And Selling Practices

Commission incentives must not encourage misleading or deceptive conduct. Your sales training and marketing scripts should comply with the Australian Consumer Law (ACL), including the prohibition on misleading or deceptive conduct under section 18. If you offer “bonuses” or “discounts,” make sure your advertised claims are accurate and backed by evidence.

Privacy And Customer Data

If your team collects or uses customer information to close deals, you’ll likely need a compliant Privacy Policy and clear internal processes for handling personal data.

Work Health And Safety

Commission targets should be ambitious but reasonable. Avoid targets that encourage burnout or unsafe practices. Your duty of care still applies to sales teams - whether they’re on the phone, on the road or working from home.

What Contracts And Policies Do You Need?

Strong documentation will save you time, reduce disputes and keep you compliant. At minimum, consider the following:

• Employment Contract: Sets base terms like role, hours, base pay, leave and termination. For sales staff, ensure it references the commission plan and how it can be updated. A tailored Employment Contract for full-time or part-time staff is the safest base.
• Employee Commission Agreement (Plan): Explains eligibility, metrics, calculations, when commission is earned, payment timing, clawbacks, quotas and treatment on termination. Use plain English and examples. See Employee Commission Agreement.
• Commission Agreement (Non-Employees): If you engage consultants, introducers or channel partners on commission, set their terms in a separate Commission Agreement to manage GST, reporting, IP and confidentiality.
• Workplace Policies: Sales ethics, expense reimbursement, conflict of interest and acceptable use policies help keep behaviour consistent and compliant.
• Privacy Policy: If your team collects customer data, publish and follow a compliant Privacy Policy and train staff on it.
• Shareholders Agreement (If You Have Co-Founders): If you’re scaling a sales-led business with multiple founders, a Shareholders Agreement (if applicable to your structure) aligns decision-making and growth incentives at the ownership level.

Also consider how commissions interact with other benefits (e.g. car allowances, phones, travel budgets). Your documents should make the interaction clear to avoid misunderstandings.

Practical Tips To Keep Commission Plans Fair And Effective

Keep It Simple And Transparent

Complex formulas create admin headaches and erode trust. Aim for a one-page summary with a couple of worked examples your team can understand at a glance.

Align Incentives With Profit, Not Just Revenue

Commission on gross margin or collected revenue often encourages healthier deals than pure top-line sales. Consider guardrails to avoid discounting that hurts profitability.

Review And Communicate Changes The Right Way

If you reserve the right to vary the plan, do so with reasonable notice and in writing. Avoid retrospective changes. Share updated summaries and FAQs with your team and get written acknowledgment.

Train Managers On Compliance

Supervisors who approve deals and commission runs should understand award coverage, ACL risks and your documentation. A short training and checklist goes a long way.

Audit Quarterly

Schedule quarterly audits of commission calculations, payroll coding (including super on commission) and refunds/clawbacks. Fixing issues early is far cheaper than responding to a claim later.

Frequently Asked Questions

Can I Pay Commission Only?

Sometimes, but it’s risky and often not compliant. Many roles are award-covered and require minimum hourly or salary rates. A base plus commission model is typically safer. Get advice before implementing commission-only roles.

Do I Have To Pay Super On Commission?

In many cases yes, because commission is commonly treated as OTE. Confirm your obligations and configure payroll correctly using the guidance on OTE and super on bonuses/commission.

When Is Commission Earned?

That depends on what you write in the plan. Many employers tie “earned” to revenue collected or the end of a cooling-off period. Choose an objective trigger and document it clearly to avoid disputes.

What If A Sale Is Refunded?

Use a clawback rule for refunds, cancellations or bad debts within a defined window. Explain how the clawback will be applied and when it will appear on payslips.

Can I Change The Commission Plan?

Yes, if your employment contract and plan allow for reasonable changes with notice. Communicate changes in advance, avoid retrospective adjustments, and obtain written acknowledgment from affected staff.

Key Takeaways

• Commission-based jobs can boost performance, but you need a clear, written plan that defines metrics, calculations, when commission is earned and when it’s paid.
• Check award coverage, the NES and minimum entitlements - commission does not replace legal minimums, and commission-only arrangements are only lawful in limited circumstances.
• Many commissions are part of Ordinary Time Earnings, so configure payroll to pay super on commission where required and keep accurate records.
• Your sales practices must comply with the Australian Consumer Law; targets should drive ethical behaviour and safe work practices.
• Protect your business with the right documents: an Employment Contract, an Employee Commission Agreement, and (for non-employees) a Commission Agreement, plus privacy and workplace policies.
• Review your plan and payroll quarterly, train managers on the rules, and communicate any changes with reasonable notice.

If you’d like a consultation on setting up commission-based jobs for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.