4. How do we deal with commission?

4. How do we deal with commission?

According to the Employment Ordinance, the definition of wages includes commission (except commission which is of a gratuitous nature or which is payable only at the discretion of the employer). Hence, other than commission which is gratuitous or payable only at the discretion of the employer, commission is wages and must be paid in accordance with the provisions of the Employment Ordinance. Subject to the provisions of other legislation, employers and employees may agree on how commission is calculated and payable in their employment contracts.

According to Section 6(5) of the Minimum Wage Ordinance, any commission paid:

• with the prior agreement of the employee
• at any time after the first 7 days of a wage period but before the end of the 7th day immediately after that wage period must be counted as part of the wages payable in respect of that wage period irrespective of when the work is done or the commission is otherwise payable under the contract of employment.

Hence, in determining whether the wages of an employee meet the minimum wage requirement, if there is prior agreement of the employee, commission can be counted as part of the wages payable in respect of a wage period according to the timing when the commission is paid. Without the prior agreement of the employee, the above provision is not applicable.

Example 1:

An employee is entitled to a basic salary plus commission according to the contract of employment. His wage period is each calendar month. According to the contract of employment, commission is payable in respect of a number of wage periods.

• → In determining whether the wages of this employee meet the minimum wage requirement, wages payable in respect of each month include the basic salary as well as the commission payable in respect of the corresponding month, no matter whether the employer has paid it or not.

Example 2:

An employer pays an employee commission of $1,000 (which is originally payable in respect of the wage period of March) on 31 January with the prior agreement of the employee.

• → In determining whether the wages of this employee meet the minimum wage requirement, this commission of $1,000 is counted as wages payable in respect of January, not as wages payable in respect of March.

   

  Being paid in the period from 8 January to 7 February, the commission is counted as wages payable in respect of January.

Example 3:

An employer pays an employee commission of $2,000 and $3,000 on 8 April and 7 June respectively with the prior agreement of the employee. The commission is originally payable in respect of the wage period of July.

• → In determining whether the wages of this employee meet the minimum wage requirement, the commission of $2,000 is counted as wages payable in respect of April and the commission of $3,000 is counted as wages payable in respect of May, both not being counted as wages payable in respect of July.

   

  Being paid in the period from 8 April to 7 May, the commission of $2000 is counted as wages payable in respect of April.

   

  Being paid in the period from 8 May to 7 June, the commission of $3000 is counted as wages payable in respect of May.