Employment Contract Template for Commission-Based Roles (UK 2025)

When You Need This Contract

Commission-based employment contracts require precise drafting to ensure the commission structure is clear, legally compliant, and commercially effective. The contract must guarantee at least the National Minimum Wage regardless of commission earnings, define exactly how commission is calculated with worked examples, specify when commission becomes payable, and include provisions for clawback of commission on cancelled deals. This is one of the most dispute-prone areas of employment law, making clarity essential.

Key Clauses

• Guaranteed base salary meeting NMW requirements
• Commission calculation formula with worked examples
• Payment timing and pipeline deal provisions at termination
• Clawback provisions for cancelled deals or customer defaults
• Target-setting process and annual commission scheme review

What to Watch Out For

• Not ensuring total pay including commission meets NMW in every pay period
• Failing to provide worked examples of commission calculations, leading to misunderstandings about expected earnings

Sample Clauses

• Sample commission calculation: 'Commission is calculated at [X]% of the net invoice value of sales completed by you. A sale is completed when the customer has paid the invoice in full. Example: A sale of £10,000 net generates commission of £[X]. Commission is paid monthly in arrears for sales completed in the previous calendar month.'
• Sample clawback clause: 'If a customer cancels their order or defaults on payment within [90] days of the sale date, the Company may deduct the commission paid on that sale from your next commission payment. The Company will notify you of any clawback and provide reasonable details.'