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Commission only payments - are they legal?

Lady M
  • Fellow PM.Dip
  • Practice Licence
  • 258 posts
  • # 71422

Hi All,

I have never come across any commission only jobs before and I need to know if they are legal? Are they not subject to minimum wage legislation?

Any advice would be a great help!
vik
  • Fellow PM.Dip
  • Practice Licence
  • 111 posts
  • # 71423

Hi

It would appear that they are legal as long as the 'sales person' is acting as a contractor and invoices the business for the commission they are due. The sales person must pay all their own NI and tax and would need to be registered as self employed.

If the sales person is treated like an employee and given any of the various benefits of employment (ie holidays, sickness etc) and they have not registered as self employed then they could be deemed an employee of the company and then yes, they should receive minimum wage.

If HMRC were to investigate and decide that the person was an employee and they weren't being treated as one they could incur a hefty fine.
Lady M
  • Fellow PM.Dip
  • Practice Licence
  • 258 posts
  • # 71426

Hi Vik,

There problem is, I'm coming across a lot of adverts for jobs that are "commission only" with no basic salary and I'm getting confused as to if these are legal or not regarding minimum wages legislation. I assume they are adverts for employees and not self-employed.
vik
  • Fellow PM.Dip
  • Practice Licence
  • 111 posts
  • # 71429

You would assume that 'job ads' meant they would be employed but until you ask them directly you may not find out.

If there is no basic salary then that role would have to be on a self employed basis otherwise it would be illegal.

Hope that helps, if not, or I'm missing something please let me know.
  • 698 posts
  • # 71542

Hi Vik and Lady M

Vik is correct if you are an employee then you must meet the national minimum wages rates regardless of how that pay is made up i.e. it can be commision only if we you work out the average hourly rate it meets or exceeds the NMW 

HMRC has very strict standards for determing employed over self employed see the following link

http://www.hmrc.gov.uk/employment-status/

This area is a bit of a minefield as we are stepping into employment law so I would advise contacting ACAS, CAB or another employment law specialist to confirm things.

Best regards
Stuart

  • Forum Moderator, South East & Greater London Regional Chairman

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