The short answer
Yes, commission only sales arrangements are legal in Australia, but only when structured correctly. The critical factor is whether the salesperson is genuinely an independent contractor or whether the arrangement is actually an employment relationship disguised as contracting.
Getting this wrong can result in significant penalties, back payment of entitlements, and legal disputes.
The contractor vs employee distinction
Australian law looks at the real nature of the working relationship, not just the label you put on it. The High Court's decision in the Personnel Contracting and Jamsek cases confirmed that the written contract is the primary reference point, but the terms of that contract must reflect a genuine contracting relationship.
Key indicators of a genuine contractor relationship include the person controls how and when they work, they can (and ideally do) work for multiple clients, they use their own tools and equipment, they bear the financial risk of the work, they have the ability to profit from their own efficiency, and they can delegate or subcontract the work.
Key indicators of an employment relationship include the business controls how, when, and where the work is done, the person works exclusively for one business, the business provides tools and equipment, the person is paid for their time rather than results, and the person cannot subcontract or delegate.
Where businesses get into trouble
The most common mistake is engaging someone as a commission only contractor while treating them like an employee. If you require them to work set hours, attend your office, follow your detailed processes, use your equipment, and work exclusively for you, you have probably created an employment relationship regardless of what the contract says.
An employee on commission only may be entitled to the applicable Modern Award minimum wage, which means you could owe back pay for any periods where their commissions fell below the minimum hourly rate.
How to structure it correctly
To maintain a legitimate contractor relationship, ensure your agents genuinely control how they work. They choose their own hours, methods, and approaches. They should be free to sell other products and work for other businesses. They should use their own phone, computer, and vehicle. And they should be registered for an ABN and manage their own tax affairs.
Your agreement should clearly state the independent contractor relationship, the commission terms, the scope of authority, and the termination provisions.
Platform based arrangements
Using a platform like Zepys provides an additional layer of structural clarity. Agents on the platform are clearly independent operators who choose which products to sell, set their own schedules, and work with multiple businesses simultaneously. The platform structure reinforces the contractor nature of the relationship.
Workers compensation and insurance
Independent contractors are responsible for their own insurance. However, some states require businesses to provide workers compensation coverage even for contractors in certain circumstances. Check the requirements in your state.
Encourage your agents to hold their own public liability insurance and professional indemnity insurance, particularly if they are meeting with clients on your behalf.
Getting professional advice
If you are unsure about the classification of your sales agents, invest in legal advice. An employment lawyer can review your arrangement and confirm whether it is compliant. The cost of this advice is trivial compared to the potential liability of getting it wrong.
The safest approach is to use structures that clearly establish the contractor relationship from the outset, which is one of the benefits of working through established platforms with standard contractor terms.