Sales Commission Structure Template Under Australian Employment Law

If you’re building a sales team (or even just bringing on your first salesperson), a commission plan can be a great way to drive revenue and reward performance.

But commission can also create disputes quickly if the rules aren’t clear. When do you pay it? What counts as a “sale”? What happens if the customer cancels, asks for a refund, or pays late? What if the salesperson resigns right after signing a big deal?

This is where a well-designed sales commission structure template helps. It gives you a consistent framework you can apply across your business, and it makes it much easier to document commission properly in an employment contract or commission agreement.

In this guide, we’ll walk through how to create a sales commission structure template that works for Australian small businesses, including common models, key legal and practical issues, and a ready-to-use template you can tailor.

What Is A Sales Commission Structure Template (And Why Does It Matter)?

A sales commission structure template is a written framework that explains:

• how commission is calculated (the formula),
• what triggers commission (the event),
• when it’s paid, and
• what happens in common “messy” situations (refunds, cancellations, part-payments, clawbacks, disputes).

For small businesses, having a template matters because it helps you avoid the most common commission headaches:

• Misaligned incentives: your salesperson focuses on “easy wins” that don’t suit your strategy (or sells unprofitable work).
• Cash flow blowouts: you pay commission before you’re actually paid by the customer.
• Disputes: your salesperson believes commission is owed, but you believe it isn’t.
• Compliance risks: your commission plan doesn’t align with Fair Work requirements (including award/enterprise agreement terms, minimum pay obligations each pay period, and lawful payroll practices).

Even if you’re using a straightforward “10% commission” approach, the details still matter. The “10%” is rarely the hard part - it’s the definitions and timing that make or break whether the structure works in practice.

Choose The Right Commission Model For Your Business

There isn’t a “one-size-fits-all” model. The best commission structure depends on your industry, your profit margins, your sales cycle, and what you want your sales team to prioritise.

1) Percentage Of Revenue (Straight Commission)

This is the simplest model: commission is a percentage of the sale value.

• Best for: simpler sales cycles, consistent margins, easy-to-track revenue.
• Watch outs: if your margins vary (e.g. different products, discounting, delivery costs), you can accidentally incentivise low-margin deals.

Example: 8% of gross revenue (excluding GST) on all new sales.

2) Percentage Of Gross Profit (Margin-Based Commission)

Commission is calculated on gross profit rather than revenue.

• Best for: businesses where discounts and costs vary and margins matter.
• Watch outs: you need reliable cost tracking to calculate gross profit consistently.

Example: 15% of gross profit on new sales.

3) Tiered Commission (Accelerators)

Tiered commission increases the rate as the salesperson hits higher targets. This can be useful where you want strong performance, but you also want to protect cash flow at lower levels.

• Best for: scaling businesses that want to “reward momentum”.
• Watch outs: it needs clear measurement periods and clear rules for timing and attribution.

Example:

• 5% on the first $50,000 per quarter
• 7% on $50,001–$100,000 per quarter
• 10% above $100,000 per quarter

4) Flat Dollar Per Sale (Bounty)

This is common where your product/service is standardised and the business values volume.

• Best for: transactional sales, lead conversion, set packages.
• Watch outs: can encourage quantity over quality unless you include a quality gate (e.g. “paid only after the customer stays for 30 days”).

Example: $250 commission per closed deal, payable after the customer pays the first invoice.

5) Commission With A Base Salary (Most Common For Employees)

Many small businesses use a base salary plus commission. This can be a good balance between stability and performance incentives.

If the person is an employee, you’ll usually document this in an Employment Contract, including how commission works and what happens in edge cases.

6) Team Commission Or Split Commission

If sales are a team effort (SDR + closer, or sales + account manager), you might split commission across roles or pay a team pool.

• Best for: complex sales cycles and collaborative sales processes.
• Watch outs: you need crystal-clear rules on who gets what, and when.

Key Legal And Practical Issues To Build Into Your Template

A strong sales commission structure template isn’t just a formula - it’s a set of rules that reduce grey areas.

Below are the issues we recommend you think about and include (in plain language) before you roll out commission to your team.

Define “Sale” Clearly

This is the number one source of disputes. Your template should define what counts as a sale, for example:

• signed contract only,
• invoice issued,
• customer payment received,
• customer past cooling-off period,
• customer has remained for X days (for subscriptions).

If you don’t define this, you’ll often end up with “I closed it” versus “We didn’t get paid” arguments.

Decide When Commission Is Earned Vs When It Is Paid

These are different concepts. You can structure it so commission is:

• earned when a valid sale is made, but
• paid after a later event (e.g. after payment is received, or after a probationary period for the customer).

This helps protect cash flow, especially where customers pay in instalments or default.

If someone resigns or is terminated, commission and final pay can become sensitive quickly. It’s worth having clear wording and processes for this, including how commission interacts with final pay.

Clawbacks, Refunds, And Cancellations

In many businesses, sales don’t always “stick”. Customers can cancel, seek refunds, or stop paying. Your template should clearly state whether you can:

• withhold commission until payment is received,
• reduce commission where there’s a partial refund, or
• reverse or adjust future commission if the sale is reversed (and in what timeframe).

Be careful with clawbacks and deductions. In Australia, employers generally can’t deduct amounts from an employee’s wages unless the deduction is authorised in writing by the employee and is principally for the employee’s benefit (or is otherwise permitted by law, an award, or an enterprise agreement). Many businesses handle “clawbacks” by adjusting future commission calculations rather than deducting from base wages, but you should get advice and document the approach clearly.

Whatever you choose, align it with how you handle refunds and consumer guarantees under the Australian Consumer Law (ACL). If you sell to consumers, commission incentives shouldn’t encourage staff to overpromise or misrepresent your offers - it’s a risk area for misleading or deceptive conduct.

Discounting Rules (And Who Can Approve Discounts)

If salespeople can discount, commission can become a “discount lever” (they might discount heavily to close a deal, then still get paid commission on revenue).

Common approaches include:

• commission calculated on the discounted price (not the list price),
• commission rate reduces if discounts exceed a threshold,
• commission calculated on gross profit, or
• discounts require manager approval.

Territory, Lead Ownership, And Attribution

If you have multiple people selling, you need rules on:

• who “owns” an inbound lead,
• what happens if a lead changes hands,
• how referrals are treated, and
• how renewals or upsells are treated.

This is especially important if you have long sales cycles or a split between lead-gen and closing.

KPIs And Conduct Requirements

Commission is usually tied to outcomes, but you can also build in eligibility rules such as:

• compliance with internal policies,
• accurate CRM records,
• no misconduct (e.g. misleading customers),
• minimum activity levels.

If you do this, keep it fair and transparent. If you rely on discretion (for example, “we can adjust commission at any time”), make sure it’s drafted carefully so you don’t create confusion or disputes later.

Sales Commission Structure Template (Copy And Tailor)

Below is a practical sales commission structure template you can adapt for your business. You can use this as a policy or schedule that sits alongside your employment contract or contractor agreement.

Important: this is general information and a starting point only. It isn’t legal advice, and it may not suit your business, your award/enterprise agreement coverage (if any), or your payroll setup. You should tailor it to your role, industry and systems, and make sure the wording matches your contract and how you actually calculate and pay commission.

1. Purpose

This Sales Commission Structure sets out how commission is calculated and paid to eligible sales staff to encourage revenue growth and align performance incentives with business objectives.

2. Definitions

• Business: [Business legal name] (ABN/ACN: [insert])
• Employee/Salesperson: [Name/Role]
• Commission Period: [Monthly/Quarterly]
• Eligible Sale: a sale that meets the criteria in clause 3
• Net Revenue: revenue received by the Business excluding GST, refunds, chargebacks, and credits
• Gross Profit (if applicable): Net Revenue less direct costs of goods/services (excluding overheads)

3. What Counts As An Eligible Sale

A sale is an Eligible Sale if all the following apply:

• a binding agreement/accepted quote is in place with the customer;
• the sale is entered into the CRM or sales tracking system within [X] days of closing;
• the customer is not in arrears at the time commission becomes payable; and
• the sale is not cancelled, reversed, or refunded within [X] days of the invoice/payment date (as applicable).

4. Commission Rate And Calculation

Commission is calculated as follows:

• Commission Type: [Percentage of Net Revenue / Percentage of Gross Profit / Flat fee per sale / Tiered]
• Commission Rate: [e.g. 8%]
• Formula: Commission = [Commission Rate] x [Net Revenue / Gross Profit] for Eligible Sales

If a tiered structure applies:

• [Insert tier 1 threshold and rate]
• [Insert tier 2 threshold and rate]
• [Insert tier 3 threshold and rate]

5. When Commission Is Earned

Commission is earned when: [e.g. the Business receives payment in full / the customer pays the first invoice / the customer remains active for 30 days].

6. When Commission Is Paid

Commission is paid on the next ordinary payroll cycle following the end of each Commission Period, provided the commission has been earned and is payable under this Structure.

7. Refunds, Cancellations, And Clawbacks

• If an Eligible Sale is fully refunded or cancelled within [X] days, no commission is payable for that sale.
• If commission has already been paid and the sale is refunded or reversed within [X] days, the Business may adjust future commission payments to account for the overpayment, subject to applicable laws and any required written agreement.
• If a sale is partially refunded, commission may be recalculated based on Net Revenue actually retained by the Business.

8. Discounting And Special Pricing

• Commission is calculated on the final sale price actually invoiced and received (excluding GST).
• Discounts above [X]% require written approval from [Manager/Director].
• Where unauthorised discounts are applied, the Business may adjust commission for that sale.

9. Lead Ownership And Split Commission (If Applicable)

Where more than one sales staff member contributes to a sale, commission will be split as follows:

• [Role A]% to [Role/Name]
• [Role B]% to [Role/Name]

10. Eligibility Conditions

To be eligible to receive commission, the Employee must:

• be actively employed and not serving notice at the time commission is paid (unless clause 11 applies);
• comply with the Business’ policies and procedures; and
• not engage in misleading conduct or other serious misconduct related to sales activities.

11. Commission On Termination Or Resignation

Where employment ends, commission will be handled as follows:

• Commission that has been earned prior to the end date will be paid in accordance with this Structure, subject to any adjustments permitted under clause 7.
• Commission that has not yet been earned as at the end date will not be payable unless otherwise agreed in writing.

12. Disputes And Review

• If the Employee disputes a commission calculation, they must notify the Business in writing within [X] days of receiving the commission statement.
• The Business may review this Structure from time to time. Any changes will be communicated in writing and will apply prospectively from the stated effective date.

How To Implement Your Commission Structure Without Creating Payroll Or HR Issues

Once you’ve got a commission template you’re happy with, the next step is implementing it cleanly across contracts, payroll, and day-to-day management.

Document It In The Right Agreement

As a small business, you’ll usually document commission in one of these ways:

• as part of an Employment Contract (common for employees);
• in a separate commission schedule/policy that is referenced by the employment contract; or
• in a contractor agreement (if your salesperson is genuinely a contractor, which is a separate classification issue).

If you’re paying sales incentives to employees, it’s also worth considering whether you need an Employee Commission Agreement so the rules are clear and consistent.

Check Minimum Pay And Award Coverage

Commission arrangements shouldn’t accidentally put you in breach of minimum wage obligations. A common risk is where a salesperson has a low base rate, or commission is irregular, and the employee’s pay in a particular pay period falls below what they’re entitled to under the Fair Work Act and any applicable award or enterprise agreement.

If your staff are covered by a modern award or enterprise agreement, you’ll want to check how commissions, bonuses, incentive payments, record-keeping, and pay cycles are treated. Award/EA terms can also affect whether commission can be offset against minimum rates and when it must be paid.

Be Clear About Payment Timing (Including If You Use Payment In Lieu Of Notice)

If a salesperson resigns or you terminate employment, you’ll need to handle final pay correctly. Sometimes employers choose payment in lieu of notice, which can raise practical questions about commission during that period.

Clear contract drafting (and consistent payroll processes) reduces the chance of disputes in an already sensitive moment.

Build A Simple Internal Process (So You Can Prove The Numbers)

Even a great commission structure can fall apart if you can’t track it reliably. As a practical minimum, make sure you have:

• a defined CRM/sales tracking tool (even a spreadsheet if you’re early-stage),
• clear responsibility for updating it,
• a monthly or quarterly commission report, and
• a clear approval process (who signs off commission before payroll runs).

Many disputes aren’t about “bad intentions” - they’re about poor records.

What Other Legal Documents Should You Consider As You Grow Your Sales Function?

Commission is often one part of a broader sales and growth strategy. As you scale, you may want to make sure your legal foundations are keeping up, especially if you’re onboarding new staff, partnering with new suppliers, or collecting more customer data.

Depending on your business model, consider:

• Employment agreements and policies: clear role expectations, confidentiality, IP ownership, and post-employment restraints where appropriate.
• Customer contracts or terms: defining deliverables, payment terms, warranty/refund handling, and limitation of liability.
• Privacy compliance: if you collect leads online, use email marketing, or store customer details, a Privacy Policy is often a key starting point.
• Company governance documents: if you’ve set up a company (or are about to), a tailored Company Constitution can help with internal rules as you add shareholders or bring on investors.
• Shareholder arrangements: if you’re building a sales-driven business and looking to raise capital, a Shareholders Agreement can be crucial for decision-making and exits.

You don’t need every document from day one. But it’s worth mapping your “next 6–12 months” growth plans so your legal setup doesn’t lag behind your sales momentum.

Key Takeaways

• A sales commission structure template helps you create clear, consistent rules around how commission is calculated, when it is earned, and when it is paid.
• The “best” commission model depends on your margins, sales cycle, and what behaviours you want to reward (revenue, profit, volume, renewals, or team performance).
• Your template should define key terms like “sale”, set payment timing, and address common issues like refunds, cancellations, discounts, lead ownership, and disputes.
• Commission arrangements should be documented properly (often in an employment contract and/or commission agreement), checked against any applicable award/enterprise agreement, and implemented with reliable tracking and payroll processes.
• Clear commission rules reduce disputes, protect cash flow, and help your business scale your sales team with confidence.

If you’d like help setting up a sales commission structure (and documenting it properly in your contracts), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.