Commission Only Contract Template for England and Wales

A Commission Only Contract is a specialized employment agreement that compensates workers solely based on their sales performance or results achieved. Under England and Wales law, this contract type requires careful structuring to ensure compliance with employment legislation while providing flexibility for performance-driven business models. You'll need this document when engaging sales representatives, agents, or other professionals where payment is directly linked to measurable outcomes rather than fixed salaries.

When do you need this document?

You should use a Commission Only Contract when hiring sales representatives for property, insurance, or retail sectors where performance directly correlates with business revenue. This agreement is essential for engaging independent sales agents who market products or services on your behalf, particularly in industries like financial services, telecommunications, or automotive sales. You'll also need this contract when establishing relationships with freelance sales professionals who prefer commission-based compensation over traditional employment structures. Additionally, this document proves valuable for seasonal sales positions where fixed salary commitments aren't viable for your business model.

Key legal considerations

The commission structure must comply with National Minimum Wage requirements, ensuring that workers receive at least minimum wage when commission earnings are calculated over the relevant pay reference period. You must clearly define commission calculation methods, payment timelines, and any circumstances that might affect commission entitlement, such as client refunds or cancelled orders. The agreement should specify whether the worker qualifies as an employee, worker, or genuinely self-employed person, as this classification affects their rights under employment legislation. Include provisions for record-keeping obligations, as you're required to maintain detailed wage calculations and commission payment records. The contract must address holiday pay entitlement for commission-only workers, calculated based on average weekly earnings over the preceding 52 weeks.

Legal requirements in England and Wales

Under the Employment Rights Act 1996, commission-only workers retain certain employment rights depending on their classification status, including protection against unlawful wage deductions and entitlement to written particulars of employment. The Working Time Regulations 1998 require you to provide adequate rest breaks and holiday entitlement, even for commission-based arrangements. You must ensure compliance with the Equality Act 2010 by avoiding discriminatory commission structures that could disadvantage protected groups. The Agency Workers Regulations 2010 may apply if the worker operates through an employment agency, affecting their rights after 12 weeks of assignment. Your contract must include clear termination procedures and notice requirements, as commission-only workers may still qualify for statutory notice periods under certain circumstances.