Digest of Benefit Entitlement Principles - Chapter 5
CHAPTER 5
EARNINGS
5.8.0 COMMISSIONS
| Regulation 36(6) | Provides for the allocation of commissions to the week in which the services that gave rise to those earnings are performed and, where, the earnings arise from a transaction, to the week in which the transaction occurred |
Commissions are a percentage or a flat rate paid based on sales made or services performed by the employee. Commissions arise out of employment under a contract of service and are earnings1.
Commissions are allocated to the period in which the services are performed that gave rise to the right to the money, and where the right to the commission arose from a transaction, commissions are allocated to the week in which the transaction occurred2.
To allocate commissions, it must be ascertained whether the right to the commission occurred due services performed or whether it is as a result of the completion of a transaction. A right to the commission occurs when claimants have the right to sue their employer for the owed commission in a court of law, that is, when claimants have an actionable right to the moneys. Although in most situations of commission sales, there may be some services performed, the right to the commission arises either from the specific services that were performed or from a specific transaction.
Claimants may have an actionable right to the commission at the time of and because of the services performed. When the actionable right is because of the services performed, there is usually not a sale of a product, although there could be. There is an offer of services (a contract is set up between the customer and the person supplying the service), someone accepts the offer, and the commission is owed3. The date the service is performed is usually simultaneous with the date of the sale and, it is at that time, claimants have an actionable right to the commission. Examples include hair dressers who receive a commission on their services, employees who prepare income tax returns, repair persons who repair appliances, or piece workers. In these situations, the commissions should be allocated to the week(s) in which the services that gave rise to the commissions were performed.
Claimants may have an actionable right to the commission only when the sale or contract is finalized4. This right may occur at the time of the sale or later, at the time of product delivery, and is determined by the terms of the contract with the customer or employer. In these situations, claimants often spend a lot of time performing services without gaining any right to any commission. Examples are cosmetic or furniture salespersons, home or door to door sales of cosmetics, jewelry, or catalogue products, and life insurance salespersons. If the finalizing of the sale or the contract (the right to the commission) occurs at a different time from the performance of services, the commissions must be allocated to the week of the transaction. Working a full working week and availability may be issues to consider for the period claimants are performing services without any income.
Sometimes, it is a later event or some other action that gives claimants the actionable right to the commission. It is the later event and not the performance of services or the time of the claimant's sale to or contract with the customer that gives them the right to the commission. Examples are: real estate sales where the right to commissions is not reached until the sale closes and the property changes hands; car sales where the right to commissions is not reached until the transfer of ownership has been completed; payments made based on the sales of people the claimants have recruited for the company; royalties, which are calculated as a percentage (for example, per play of a commercial) or are calculated periodically (for example, replays of a commercial) that provide for further rights to commissions; renewal of life insurance policies where later anniversary dates of the renewals provide the right to subsequent commissions. In these situations, the commissions should be allocated to the week of the transaction.
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