Can I Pay My Employees Commission Only? (2026 Updated)

If you're hiring your first salespeople (or trying to scale a growing team), commission-only pay can look like the perfect solution.

You only pay when revenue comes in, your cashflow stays predictable, and your team has a clear incentive to sell.

But in the UK, "commission-only" is one of those arrangements that can be lawful in principle and risky in practice. The legal catch is that even if you call someone an "employee" (or ask them to sign an agreement saying they're happy with it), the law still expects you to meet certain minimum standards around pay, working time, and employment rights.

Below, we'll walk you through what commission-only pay really means, when it can work, where businesses commonly get caught out, and how to set it up in a way that protects you from day one.

What Does "Commission Only" Mean In Practice?

Commission-only pay usually means the person doesn't receive a fixed salary or hourly wage. Instead, they earn money based on:

• a percentage of sales they bring in;
• a set fee per sale (for example, ?50 per contract signed);
• a tiered rate (for example, 5% up to ?20,000 revenue, then 8% beyond that); or
• a bonus/accelerator structure (for example, extra commission once targets are hit).

It's also common to see hybrids that still get described as "commission only", such as:

• draw against commission (a recoverable advance each month, then reconciled against earned commission);
• commission plus expenses (no base pay, but travel or client costs reimbursed); and
• commission plus guarantee (a minimum "floor" payment to ensure they take home at least a certain amount).

The key point is this: the label matters far less than the reality. If someone is working hours for you, under your control, in your business, the law may treat them as a "worker" or "employee" even if their pay is variable.

If you're unsure what status applies, it's worth getting clear on the difference between Worker Vs Employee before you lock in a pay model.

Is Commission-Only Pay Legal In The UK In 2026?

Commission-only pay can be legal in the UK, but only if you structure it so you still comply with mandatory employment protections.

In other words, the big legal question isn't "Can I pay commission only?" It's:

After you account for their working time, does their total pay meet the National Minimum Wage (or National Living Wage) rules, and are you meeting other statutory obligations?

Whether commission-only is workable also depends on who you're engaging:

If They're An Employee Or Worker

If they're classed as an employee or worker, they'll usually be entitled to things like:

• at least the applicable National Minimum Wage/National Living Wage on average over the pay reference period;
• paid holiday (and holiday pay calculated correctly);
• rest breaks and working time protections;
• protection from unlawful deductions from wages;
• itemised payslips;
• auto-enrolment pension duties (if eligible); and
• statutory sick pay (if they qualify).

So yes, you can have a commission-only structure, but you may still need to "top up" pay if commission doesn't reach minimum wage levels for the hours worked.

If They're Genuinely Self-Employed

If they're genuinely self-employed, you generally have more flexibility in how you pay them (and minimum wage rules usually won't apply in the same way).

However, this is where businesses often get into trouble: calling someone "self-employed" doesn't make it true. If the relationship looks like employment (set hours, no real ability to substitute, managed like staff, integrated into your business), HMRC and tribunals may treat them as a worker/employee anyway, with backdated liabilities.

If you're considering this route, it's smart to treat it as a legal risk decision, not just an operational one.

Minimum Wage, Working Time And Holiday Pay: The Big Compliance Traps

If there's one reason commission-only pay structures fail, it's this: businesses build an exciting incentive plan, but forget that employment law still cares about time.

Here are the main compliance traps to watch.

1) National Minimum Wage (And Why Commission Doesn't Automatically Solve It)

Minimum wage compliance is usually assessed by reference to:

• how many hours the person worked in the relevant pay period; and
• how much they were paid for that period (including commission that counts as pay).

So if someone works 160 hours in a month and earns ?800 commission, that's ?5/hour in that pay period. If that's below the minimum wage for their age bracket, you may need to top it up.

Where businesses get caught is when:

• hours aren't recorded properly (so you can't prove compliance);
• commission is paid quarterly, but hours are worked weekly (creating low-pay periods);
• training time, meetings, admin time, or mandatory standby time isn't treated as working time; or
• deductions (uniforms, equipment, chargebacks) bring pay below the threshold.

If you're tempted to treat early periods as "unpaid" until sales come in, be careful - the UK has strict rules around when free labour is lawful, and unpaid work rules can apply even if someone agrees to it.

2) Working Time Rules Still Apply

Commission-only doesn't mean "work whenever you want with no limits". If they're a worker/employee, the Working Time Regulations 1998 can still apply, including rest breaks and weekly rest, and (unless they opt out) the average 48-hour weekly limit.

This matters because commission-only roles can quietly encourage long hours - which can create compliance problems and burnout.

It's worth being across the basics in Working Time Regulations, especially if your sales cycles are intense or seasonal.

3) Paid Holiday And Holiday Pay Can Be Tricky With Commission

Workers and employees are generally entitled to paid holiday. Where you pay commission, you also need to think about how holiday pay is calculated.

In many roles, holiday pay shouldn't be based solely on a basic salary (because there isn't one), and commission may need to be reflected so the person isn't financially penalised for taking leave.

This is a common area for disputes because:

• sales staff often earn uneven amounts across the year;
• commission is sometimes paid after the month it's earned; and
• businesses may try to "roll up" holiday pay informally without properly documenting it.

The practical takeaway is simple: if you're going commission-only, you need a clear method for holiday accrual and pay, and you need it written into the contract.

4) Deductions, Chargebacks, And Late Payments Create Legal Risk

Commission-only models often involve adjustments, such as:

• chargebacks if a customer cancels;
• clawback if an invoice isn't paid;
• reversals for refunds; or
• withholding commission until a "validation" stage is complete.

These mechanisms can be commercially sensible, but they're also where wage disputes happen - especially if deductions aren't clearly authorised in writing.

Also, if commission is the person's only income, delays are felt immediately. If you're unsure what your obligations look like when payroll doesn't land on time, paying employees late is a good issue to understand early (and avoid).

Getting The Paperwork Right: Contracts And Policies

If you want commission-only pay to work long-term, your legal foundations matter just as much as your sales strategy.

A well-drafted contract doesn't just reduce disputes - it also helps you prove compliance (for example, what counts as working time, how commission is earned, and when it's payable).

Use The Right Agreement For The Relationship

Start by documenting the relationship properly:

• If you're hiring someone as staff, an Employment Contract is the usual starting point.
• If commission is a key part of the arrangement, an Employee Commission Agreement (or a commission schedule attached to the employment contract) helps spell out the detail.

The contract should be consistent with reality. If you say "you can choose your hours", but you then roster them 9?5 and require daily reporting, that mismatch can cause problems later.

Key Clauses To Include In A Commission-Only Arrangement

Most disputes aren't about whether someone can be paid commission - they're about what the commission rules actually were. Your documents should cover, at minimum:

• How commission is earned: what counts as a "sale", what happens with partial payments, upgrades, renewals, or bundles.
• When commission is payable: on signing, on invoice, on receipt of payment, after cooling-off periods, etc.
• Validation conditions: for example, no fraud, correct paperwork, customer passes credit checks.
• Clawback/chargeback rules: the scenarios where commission can be reversed, and the time limits.
• Leavers: what happens if they resign or you terminate their employment - do they get paid commission "in the pipeline?"
• Discretion wording (carefully): you might want flexibility, but overly broad discretion can be hard to enforce and can damage trust.
• Minimum wage compliance approach: whether you'll top up pay if needed, and how hours are tracked.
• Expenses: what you reimburse and what needs pre-approval.
• Confidentiality and IP: protecting pricing, lead lists, scripts, and customer data.

It can feel like a lot, but that detail is what keeps commission-only models from becoming "we had a verbal understanding" disputes.

Commission-Only Roles In Practice: How To Structure A Compliant Plan

Once you accept the legal reality - that minimum standards still apply - the next step is to build a structure that's fair, motivating, and compliant.

If you want a deeper dive into the nuts and bolts, commission-only sales position planning is worth doing before you hire.

Here are practical approaches that tend to work well for UK businesses.

1) Consider A Minimum "Floor" (Even If It's Temporary)

Many businesses start with a guaranteed minimum payment for an initial ramp-up period (for example, the first 1?3 months). This helps with:

• attracting stronger candidates (they can afford to take the job);
• reducing minimum wage risk while leads and pipelines build; and
• making performance management clearer.

You can still keep commission as the primary incentive - the "floor" just reduces the legal and practical fragility in the early weeks.

2) Track Working Time (Even For Flexible Sales Roles)

If your role is commission-driven, you might not want to micromanage hours. But you should still have a sensible process for recording working time so you can show you're meeting minimum wage obligations.

This can be as simple as:

• a weekly self-declared timesheet;
• CRM activity logs plus meeting calendars;
• clear definitions of what counts as working time (calls, demos, admin, mandatory meetings); and
• a policy that overtime needs approval.

This is one of those "boring now, lifesaver later" systems that protects you if there's a complaint or audit.

3) Be Clear About Targets, Territories, And Lead Ownership

Commission-only staff will naturally prioritise what maximises their earnings. If you don't define the rules, you can end up with internal disputes like:

• two people claiming the same lead;
• commission arguments when a sale is handed over mid-process; or
• territory overlaps (especially if you sell online).

Spell out:

• how leads are allocated;
• how long a lead "belongs" to someone;
• what happens if management reassigns accounts; and
• how renewals and upsells are treated.

4) Manage Underperformance Like An Employment Issue (Not A Moral Issue)

Commission-only doesn't mean "they're only paid if they perform, so we can end it whenever". If they're an employee, you still need fair processes around performance and dismissal.

It's also worth remembering that poor results aren't always misconduct - they may be training, resources, market fit, or lead quality.

Having a clear performance framework (and using it consistently) reduces legal risk and helps you build a sustainable sales culture.

5) Don't Forget Data Protection And Confidentiality

Salespeople often handle personal data (leads, prospect lists, contact details), and sometimes sensitive information too.

Make sure you have:

• confidentiality obligations in the contract;
• an acceptable use approach (especially if they use personal devices); and
• clear rules for CRM access and what happens when they leave.

These issues often pop up later in disputes, especially where someone leaves and tries to take a book of business with them.

Key Takeaways

• Commission-only pay can be legal in the UK, but you still need to comply with minimum standards around pay and working time if the person is a worker or employee.
• The biggest legal risk is National Minimum Wage/National Living Wage compliance - if commission doesn't meet the threshold for hours worked in a pay period, you may need to top up.
• Working time rules and paid holiday still apply to workers/employees, and holiday pay can get complicated when pay is mostly commission-based.
• Chargebacks, clawbacks, and withholding commission are common flashpoints, so deductions and payment rules should be clearly authorised in writing.
• A properly drafted Employment Contract plus a clear Employee Commission Agreement helps prevent disputes and sets expectations from day one.
• If you're unsure about employment status or how to structure a compliant plan, get tailored legal advice before you hire - it's far easier than fixing problems after a dispute starts.

If you would like help setting up a commission-only arrangement (or reviewing whether your current structure is legally compliant), you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.