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If you’ve ever worked in real estate or a car dealership, you’re likely very familiar with sales commission. This means that employees are paid based on their sales performance. In today’s competitive market, especially as we move through 2025, commission structures can be designed in one of two ways:
- Commission is paid in addition to their existing wage
- Commission is paid as the sole component of their wage
When you opt for the first method, commission serves as an incentive or bonus on top of the base wage, ensuring that employees still receive their NES entitlements. This model is widely used across sectors to motivate staff while guaranteeing a stable income.
The second method-where commission is the only payment-requires extra care and clear documentation. Here’s what you need to know in 2025.
When Can I Pay My Employees Commission Only?
You can only pay your employees commission only if they are covered by a modern award or registered agreement that permits this arrangement. For example, under the Real Estate Award, employees may be compensated solely on commission, meaning the minimum wage requirements do not apply. This remains consistent with updated Fair Work regulations in 2025 – for comprehensive insights, check out our Modern Award Analysis.
Industries such as real estate often adopt commission-only structures because the company’s revenue is directly linked to individual sales performance. This approach motivates employees to perform at their best by aligning their earnings with the overall success of the business.
For example, imagine Jack works in real estate and is covered by the Real Estate Award. Jack signs a written agreement with his employer stating that he will be paid solely on commission. His income is entirely performance-based, as clearly outlined in the contract. In contrast, if Jack were employed at a retail clothing store, he would not be covered by such an award, meaning he must receive at least the minimum wage in addition to any commission-based payments.
Are There Certain Requirements?
If you want to pay your employees commission only, you need to ensure that:
- Your employee’s modern award permits commission-only payments
- Your employment contract aligns with a commission-only structure
- A written agreement clearly outlines how commission is calculated and paid
It’s also essential that your employee receives a copy of this written agreement so that everything is transparent from the outset. For further guidance on ensuring your documentation is robust and legally binding, take a look at our article on what makes a contract legally binding.
What Kind Of Written Agreement Do I Need?
The most effective way to establish a commission-based payment structure is to implement an Employee Commission Agreement. This document outlines the terms of payment, the commission calculation method, and any other vital conditions. It’s typically provided at the start of the employment relationship to ensure both parties clearly understand their obligations.
What About Contractors?
Contractors can also be paid on a commission-only basis, but this must be clearly documented in a Commission Agreement. However, extra caution is required to avoid sham contracting, which can expose your business to legal risks.
What Is Sham Contracting?
Sham contracting occurs when an employer deliberately classifies an employment relationship as a contractor arrangement to evade legal obligations such as superannuation and minimum wage. In 2025, with greater scrutiny from Fair Work authorities, it is more important than ever to ensure your agreements reflect the true nature of the working relationship. For an in-depth look, read our case study on Uber Eats unfair dismissal.
Understanding the difference between employees and contractors is crucial. This knowledge helps you spot potential sham contracting arrangements and ensures your compensation practices remain fair and legally compliant.
As an employer, it is important to regularly review your contractual relationships and ensure that all legal obligations are met – not only to protect your business but also to maintain a motivated workforce. Staying informed about the latest legislative updates and industry best practices is key to avoiding compliance issues.
In today’s dynamic environment, seeking periodic legal advice is paramount. Recent amendments in employment law have refined the parameters around commission-only arrangements, and our team is here to help you navigate these changes. For instance, our contract review services can provide peace of mind by ensuring your agreements remain compliant and effective.
Need Help?
The legal side of employment obligations can be complex. If you’re unsure whether your modern award permits commission-only payments or have general questions about employment relationships, have a quick chat with our team of lawyers!
You can reach out to us at team@sprintlaw.com.au or call 1800 730 617 for an obligation‑free chat.
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