Can an employer pay a sales employee below the minimum wage if they earn commission in Australia?

No. Under the Fair Work Act 2009 (Cth) and the National Minimum Wage Order, all Australian employees are entitled to at least the applicable minimum wage for all hours worked, regardless of how much commission they earn. An employer cannot pay a base salary below the Modern Award minimum rate and rely on commission to 'top up' to the minimum. If an employee earns insufficient commission in any given pay period to bring their total earnings up to the minimum wage for hours worked, the employer must make up the difference from the base salary. Employers should ensure the base salary specified in the commission agreement is at or above the applicable minimum wage at all times, including after each Annual Wage Review.

Is superannuation payable on commission payments in Australia?

The question of whether superannuation is payable on commission depends on how the commission is characterised. Under the Superannuation Guarantee (Administration) Act 1992 (Cth), superannuation at 11.5% is payable on 'ordinary time earnings', which generally includes salary, wages, and certain allowances paid in relation to ordinary hours of work. Commissions that are paid as a direct supplement to ordinary time work (i.e. where the employee was working ordinary hours and earned commission on those hours) are generally considered ordinary time earnings and attract superannuation. However, commissions that are truly incentive-based or relate to performance outside ordinary hours may be treated differently. Employers should seek professional tax and superannuation advice regarding the correct treatment of commissions for superannuation guarantee purposes.

Can an employer include a commission clawback clause in an Australian employment contract?

Yes, but with important limitations. A commission clawback provision allows an employer to recover commission that has been paid if, for example, a customer subsequently cancels their order or fails to pay. In Australia, any deduction from an employee's wages to recover commission requires the employee's prior written authorisation in accordance with the Fair Work Act 2009 (Cth) s 324, unless the deduction is expressly permitted by a Modern Award or enterprise agreement. A clawback clause in an employment contract or commission agreement can constitute the required written authorisation, provided it is clear, specific, and signed by the employee. Employers should also ensure that any clawback does not reduce the employee's net pay below the applicable minimum wage for any pay period.

What happens to a sales employee's commission when their employment is terminated in Australia?

The entitlement to commission on termination of employment depends on the terms of the commission agreement. In the absence of express terms, Australian courts and tribunals have generally held that an employee is entitled to commission that has been 'earned' (i.e. the underlying sale has been completed and the conditions for commission have been met) prior to the termination date, even if the commission has not yet been paid. However, commission on sales that are not invoiced or settled until after the termination date is generally not payable unless the commission agreement specifically provides for it. A well-drafted commission agreement should clearly define when commission is 'earned' and what happens to earned but unpaid commission on termination, to avoid disputes.

What Modern Award applies to sales staff in Australia?

The applicable Modern Award for sales staff depends on the industry in which the employee works. Common Modern Awards for sales roles include: the General Retail Industry Award 2020 (for retail sales staff); the Clerks — Private Sector Award 2020 (for internal sales and customer service roles in a clerical setting); the Real Estate Industry Award 2020 (for real estate agents and property managers); the Banking, Finance and Insurance Award 2020 (for financial services sales roles); and the Manufacturing and Associated Industries and Occupations Award 2020 (for sales roles in manufacturing). If no industry-specific Modern Award applies, the Miscellaneous Award 2020 may cover the role. Employers should check the Fair Work Commission's Find My Award tool at www.fairwork.gov.au to determine the correct Modern Award for their employee's role.

An Australian Commission Agreement is a supplemental employment contract that sets out the terms of a commission-based remuneration structure for sales staff. It defines the commission rates, the calculation base (e.g. Net Revenue or Gross Profit), eligible sales, payment timing, and any clawback provisions. This template is drafted in accordance with the Fair Work Act 2009 (Cth), the National Minimum Wage Order, the applicable Modern Award, and the Superannuation Guarantee (Administration) Act 1992 (Cth). What is a Commission Agreement? A Commission Agreement (also called a sales commission agreement, commission-based employment agreement, or variable remuneration agreement) is a contract that supplements an employee's employment contract by setting out the terms of a commission-based component of their remuneration. In Australia, commission-based sales roles are common across industries including real estate, finance, insurance, technology, retail, and professional services. Unlike commission structures in some overseas jurisdictions, Australian employment law imposes minimum wage protections that apply regardless of commission earnings — meaning an employer cannot reduce or 'offset' an employee's minimum award entitlements against commissions earned. The Fair Work Act 2009 (Cth) and Minimum Wage Requirements All Australian employees, including those on commission-based remuneration, must be paid at least the applicable minimum wage for all hours worked. This minimum wage is either the National Minimum Wage (for award/agreement-free employees earning below the high income threshold) or the applicable Modern Award minimum rate for their classification. The Fair Work Commission conducts an Annual Wage Review each year and issues updated minimum wage orders. Employers who rely on commission income to make up the minimum wage (i.e. pay a lower base salary in the expectation that commission will top it up) risk contravening the Fair Work Act 2009 (Cth) if the employee earns insufficient commission in any given pay period. This means that a commission agreement must provide for a sufficient base salary that, on its own, meets the applicable minimum wage requirement — and commission is payable on top of that base salary. When is a Commission Agreement Needed? A Commission Agreement is needed whenever an employer wishes to include a commission-based component in the remuneration of a sales employee. It is particularly important for: - Business development managers and account executives - Real estate agents and mortgage brokers - Insurance brokers and financial advisers - Retail sales staff who earn commissions on product sales - Technology and SaaS sales representatives - Any employee whose total remuneration includes a variable commission component Key Elements of an Australian Commission Agreement A comprehensive Australian Commission Agreement should include the following key elements: 1. Parties and role details: Full legal names, ABN, job title, employment type, commencement date, and the applicable Modern Award or enterprise agreement. 2. Sales territory and product lines: A clear definition of the geographic territory and/or product lines for which the employee is responsible and on which commissions are calculated. 3. Base salary: The guaranteed annual base salary, exclusive of commission and superannuation. The base salary must be at or above the applicable Modern Award minimum or National Minimum Wage. 4. Superannuation: Contributions at 11.5% of ordinary time earnings (from 1 July 2024) under the Superannuation Guarantee (Administration) Act 1992 (Cth). Note that superannuation is generally payable on the base salary, and the treatment of superannuation on commission payments is a complex area that depends on the characterisation of the commission. 5. Commission rate(s): The commission percentage(s) applicable to eligible sales, which may be a flat rate or a tiered structure with different rates at different revenue thresholds. 6. Commission calculation base: The revenue or profit figure on which commission is calculated, including a clear definition of what is included and excluded (e.g. whether GST, returns, and discounts are deducted before calculating commission). 7. Eligible sales and exclusions: Which sales qualify for commission and which are excluded (e.g. house accounts, inter-company sales, or sales where payment is not received). 8. Commission payment timing: When commission is calculated and paid (e.g. monthly, based on invoiced revenue or collected revenue). 9. Clawback provision: Whether the employer can recover commission paid if a customer subsequently cancels or defaults. Any deduction from wages for this purpose must comply with the Fair Work Act 2009 (Cth) s 324, which requires the employee's written authorisation for most wage deductions. 10. Sales targets and KPIs: The quantitative targets and key performance indicators applicable to the role and the consequences of not meeting them. 11. Leave and commission: How commission interacts with periods of paid leave. 12. Commission on termination: The employee's entitlement to commissions on and after the termination of employment. This template is suitable for use across all Australian states and territories, including New South Wales, Victoria, Queensland, Western Australia, South Australia, Tasmania, the Australian Capital Territory, and the Northern Territory.

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