Employee Commission Agreement Template for Indonesia

An Employee Commission Agreement is a specialized employment contract that establishes the terms and conditions for commission-based compensation in Indonesia. This document creates a legal framework between employers and sales employees, defining how commissions are calculated, when they are paid, and what performance metrics determine eligibility. Under Indonesian labor law, particularly Law No. 13 of 2003 on Manpower, all compensation arrangements must be clearly documented to protect both parties and ensure regulatory compliance.

When do you need this document?

You need an Employee Commission Agreement whenever you hire sales representatives, business development executives, or any employee whose compensation depends partially or entirely on sales performance. This document is essential when establishing new sales teams, transitioning employees from fixed salaries to commission structures, or expanding into new markets where performance-based compensation drives results. Companies in retail, real estate, insurance, and B2B sales particularly benefit from formal commission agreements that clarify expectations and prevent disputes over payment calculations.

Key legal considerations

Your commission agreement must clearly define commission rates, calculation methods, and payment schedules to avoid conflicts. Include specific provisions for scenarios like customer returns, cancelled orders, and disputed sales to protect your business interests. The agreement should establish minimum performance thresholds and outline consequences for non-performance while ensuring compliance with Indonesia's minimum wage requirements. Consider including confidentiality clauses, non-compete restrictions, and territory assignments to protect your business relationships and market position. Tax withholding obligations under Law No. 36 of 2008 on Income Tax must be clearly addressed, specifying who bears responsibility for commission-related tax payments.

Legal requirements in Indonesia

Indonesian law requires that commission agreements comply with Government Regulation No. 78 of 2015 on Wages, which governs variable compensation structures. Your agreement must ensure that total compensation, including commissions, meets provincial minimum wage standards as mandated by regional wage councils. Minister of Manpower Regulation No. 1 of 2017 provides guidelines for performance-based compensation that your agreement must follow, including transparent calculation methods and regular payment schedules. The document must be written in Indonesian or accompanied by certified translations for legal validity. Additionally, you must maintain proper records of commission calculations and payments for labor inspection purposes, and ensure that commission structures do not violate anti-discrimination provisions in employment law.