Commission earning employees are no different from any other employee except for the fact that their remuneration is commission based. Employment conditions are regulated in terms of the Basic Conditions of Employment Act and any applicable Bargaining Council Agreement or Sectoral Determination, depending on the industry. All labour legislation still applies, including the National Minimum Wage Act, which clearly states that every employee must be paid at least the minimum wage published by the minister of Employment and Labour each year. Employees can always earn more, but an employer must ensure that they earn at least the prescribed minimum.
The purpose of a commission-based remuneration structure is to motivate and reward employees when they perform well. It makes sense especially in sales and marketing positions where you earn more if you sell more.
What about performance?
If a commission only employee does not perform satisfactorily and does not meet the employer’s fixed standard, the employer has the right to act in terms of the poor work performance, incapacity, or disciplinary procedure (misconduct) depending on the merits of each case after due investigation.
It is very important that the employer implement a job description: a written document that sets out the tasks and duties expected of the employee to do. This document forms part of the employment contract and is an attachment to the employment contract. The use of a job description has many benefits for the employer:
- This confirms the tasks/duties that the employer employs the employee to perform.
- It links a fixed standard regarding quantity and quality to the above tasks/duties.
- It forms the basis of regular performance appraisals when looking at increases and/or performance bonuses.
- The job description is a critically important document when addressing poor work performance.
What about UIF and COIDA?
Employers must take note that legislation such as the Unemployment Insurance Act (UIA) and the Compensation for Occupational Injuries and Diseases Act (COIDA) also apply to commission earning employees. They should also be protected in cases of unforeseen unemployment or when they are injured at work.
UIA applies to all employers and employees (excluding employees working less than 24 hours a month for an employer). An employer does not have any discretion whether or not to register for unemployment insurance and to pay over the monthly contributions (1% deducted from the employee’s salary for the employee’s contribution and 1% of the employee’s salary for the employer’s contribution).
COIDA applies to all employers and casual and full-time employees who, as a result of a workplace accident or work-related disease are injured, disabled, killed or become ill. An employer carrying on business in South Africa, must register with the Compensation Commissioner, and pay the annual assessment fee.
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