Commission Only Contract Template for New Zealand

A Commission Only Contract is a specialized employment agreement that establishes a purely performance-based compensation structure between a business and a sales professional. Under this arrangement, you receive payment only when you successfully generate sales, leads, or other agreed-upon outcomes, with no guaranteed base salary or hourly wage.

When do you need this document?

You need a Commission Only Contract when engaging sales representatives, distributors, or independent agents who will be compensated exclusively through commission payments. This document is essential for real estate agencies appointing property agents, insurance companies engaging brokers, technology firms hiring software sales representatives, or retail businesses appointing independent distributors. The contract is particularly valuable when you want to minimize fixed labor costs while incentivizing high performance, or when entering new markets where success is uncertain and you need flexible cost structures.

Key legal considerations

The most critical consideration is correctly establishing the contractor relationship to avoid inadvertent employee status under the Employment Relations Act 2000. Your contract must clearly define the commission structure, including calculation methods, payment schedules, and any minimum performance thresholds. Include comprehensive territorial definitions and exclusivity clauses to prevent conflicts over commission entitlement. Address intellectual property ownership, confidentiality obligations, and non-compete restrictions where appropriate. Consider including dispute resolution mechanisms and termination procedures that protect both parties' interests. You must also address tax obligations, particularly GST registration requirements if the commission earner's income exceeds the threshold, and ensure compliance with Fair Trading Act requirements to prevent misleading conduct.

Legal requirements in New Zealand

Under the Employment Relations Act 2000, you must clearly distinguish between employee and contractor relationships, as misclassification can result in significant legal and financial consequences. The Contract and Commercial Law Act 2017 governs contract formation and enforcement, requiring clear terms and consideration for validity. Fair Trading Act 1986 compliance is essential to ensure all representations about earning potential and business opportunities are accurate and not misleading. Income Tax Act 2007 provisions apply to commission payments, requiring proper tax treatment and potential PAYE obligations depending on the relationship structure. If the commission earner's annual turnover exceeds $60,000, GST registration under the Goods and Services Tax Act 1985 may be required. Additionally, if the relationship is determined to be employment rather than contracting, Holidays Act 2003 entitlements may apply, making proper classification crucial from the outset.