What is a commission / sales representative agreement?
Is a commission / sales representative agreement enforceable in South Africa?
“commission determined by GP sold was earned by Redelinghuys when she concluded a deal. It only became payable once the revenue started to flow… the employer failed to prove there was a contractual term that she forfeited any claim to commission just because she left the firm.”
“when a court determines the question of an employment relationship, it must work with three primary criteria: An employer’s right to supervision and control; Whether the employee forms an integral part of the organisation with the employer; and The extent to which the employee was economically dependent upon the employer.”
“Until the contrary is proved, for the purposes of this Act, any employment law and section 98A of the Insolvency Act, 1936 (Act No. 24 of 1936), a person who works for, or renders services to, any other person is presumed, regardless of the form of the contract, to be an employee, if any one or more of the following factors are present… Subsection (1) does not apply to any person who earns in excess of the amount determined by the Minister in terms of section 6(3) of the Basic Conditions of Employment Act.”
When you need a Commission / Sales Representative
- When you appoint a salesperson, agent or representative to sell your products or services and you want to pay them by commission on what they sell, rather than (or in addition to) a fixed salary.
- When you want certainty over the single most-litigated point — exactly when commission is earned, when it becomes payable, and whether unpaid commission survives the rep’s resignation or dismissal.
- When you intend to engage the rep as a genuine independent contractor and need the agreement, and the way the relationship actually runs, to withstand the dominant-impression test and the section 200A employee presumption.
- When a rep will handle customer relationships, pricing and your confidential client lists, and you need confidentiality, restraint-of-trade, non-solicitation and POPIA obligations binding on them.
- When you need to define a sales territory, customer base or product range exclusively (or non-exclusively) for the rep, and control whether commission is paid on repeat or renewal orders.
What a Commission / Sales Representative should contain
Commission rate and how it is calculated
State the commission rate (percentage or fixed amount), the base it is calculated on (gross sale value, net revenue, or gross profit), whether VAT is included or excluded, and any tiers, accelerators or caps. Ambiguity here is read against the drafter, so define the calculation base precisely — a percentage of "sales" with no further definition invites a dispute.
When commission is earned vs when it is payable
Separate the two moments expressly. Redelinghuys v Adapt IT turned on this: commission may be earned when the sale is concluded but only payable once the customer pays. Say whether commission accrues on order, on invoice, on delivery, or on the customer settling — and tie the payment date and frequency to that trigger.
Clawback, chargeback and forfeiture
Spell out when paid commission is reversed — customer cancellations, returns, refunds, bad debts or charge-backs — and any genuine forfeiture of earned-but-unpaid commission on termination. Redelinghuys confirms a court will not imply forfeiture: if you want to forfeit a departing rep’s pipeline or accrued commission, it must be an express, clear contractual term.
Status, control and the no-employment / employee acknowledgement
If you intend an independent contractor, state it and structure the relationship to match — the rep controls their own hours and methods, carries their own costs and is not integrated into your business. If the rep is in truth an employee on commission, treat them as one. The clause is never decisive; the dominant-impression test and the section 200A presumption look at the real relationship.
Territory, products, prices and exclusivity
Define the geographic territory, customer segment or named accounts the rep covers, the products or services they may sell, the price list or discount limits they must work within, and whether the appointment is exclusive. Set who owns "house accounts" and whether commission is earned on orders the rep did not personally solicit.
Targets, draws and minimum remuneration
Record any sales targets, the consequences of missing them, and whether the rep receives a non-refundable retainer or a recoverable draw (advance) against future commission. If the rep is an employee, remember any guaranteed component must still meet the BCEA minimum-wage and remuneration floor — commission counts towards remuneration but cannot be used to dip below the statutory minimum.
Confidentiality, restraint, non-solicitation and POPIA
Bind the rep to keep customer lists, pricing and pipeline confidential, to a reasonable restraint and non-solicitation of customers and staff after they leave, and — where they process customer personal information for you — to operator obligations under POPIA. A rep’s client connections are exactly the asset a leaving salesperson takes with them, so these protections earn their keep.
Term, termination and post-termination commission
Set the term and notice, the grounds for termination, and — critically — what happens to commission on deals that are in the pipeline or that pay out after the rep leaves. Address renewals, recurring revenue and trail commission. Silence on post-termination commission is precisely where Redelinghuys-style claims arise.
Commission rep as independent contractor vs employee in South Africa
| Feature | Independent contractor rep | Employee on commission |
|---|---|---|
| Nature of contract | Contract for services — runs their own sales business | Contract of employment — commission-based remuneration |
| Control | Controls own hours, route, method and targets | Subject to the employer’s control, hours and sales meetings |
| Integration | Sells for several principals; not part of the business | Integrated into the business; usually sells only for the employer |
| Pay & tax | Invoices commission; responsible for own tax | Commission is remuneration; PAYE, UIF and BCEA apply |
| Minimum pay | No wage floor — purely contractual | Commission counts to remuneration but cannot fall below the minimum wage / BCEA floor |
| Protection | Governed by the contract; no LRA/BCEA unfair-dismissal rights | LRA & BCEA protection (unfair dismissal, leave, notice) |
| Reclassification risk | Real — control + dependence can make them an employee (Linda Erasmus) | Already an employee; s 200A presumption already met |
Common South African pitfalls
- Leaving "earned" and "payable" undefined. The single biggest source of commission disputes is silence on when commission accrues. In Redelinghuys v Adapt IT the court split the two — earned on conclusion, payable on revenue — and read the gaps in the rep’s favour. Define both moments and the payment trigger expressly.
- Assuming the "independent contractor" label sticks. Commission-only reps and estate agents are regularly reclassified as employees where the company controls their hours, methods, meetings and reporting (as in Linda Erasmus Properties v Beytell). Reclassification brings unfair-dismissal, leave, notice, PAYE and UIF exposure.
- Forfeiting commission without an express clause. You cannot quietly forfeit a departing rep’s earned or pipeline commission. Redelinghuys confirms a court will not imply forfeiture — without a clear written forfeiture term, the rep keeps what they earned, plus you may pay their costs.
- Using commission to undercut the minimum wage. If the rep is an employee, commission forms part of remuneration but the arrangement must still satisfy the National Minimum Wage Act and the BCEA floor for the hours worked — a pure "commission-only" structure that yields less than the minimum is non-compliant.
- No restraint or non-solicitation. A salesperson leaves with your customer relationships and pricing knowledge. Without a reasonable, narrowly-tailored restraint and non-solicitation clause, you have little to stop them taking your customers to a competitor.
Frequently asked questions
Is a commission / sales representative agreement legally enforceable in South Africa?
Yes. It is a valid, enforceable contract. South African law does not fix commission rates or structures, so above the statutory minimums the contract governs. The two points that decide most disputes are whether the rep is truly an independent contractor or really an employee, and exactly when commission is earned, payable and capable of being forfeited.
When is commission legally "earned" versus "payable"?
They are different moments and the contract should define both. In Redelinghuys v Adapt IT (2023) the Labour Court held that commission was earned when the sale was concluded, but only became payable once the resulting revenue began to flow. If your agreement is silent, a court fills the gap in the way that makes commercial sense — usually favouring the rep.
Can I refuse to pay commission once a rep resigns?
Not unless your contract clearly says so. In Redelinghuys v Adapt IT the employer could not withhold a departing employee’s earned commission because it had failed to prove any contractual term of forfeiture. To forfeit accrued or pipeline commission on resignation or dismissal, you need an express, unambiguous forfeiture clause — a court will not imply one.
Is a commission-only sales rep an employee or an independent contractor?
It depends on the substance of the relationship, not the label. Courts and the CCMA apply the dominant-impression test (control, integration, economic dependence) from SITA v CCMA. Commission-only reps and estate agents are often found to be employees where the company controls their hours, methods and reporting — as in the Linda Erasmus Properties matter — which brings full LRA and BCEA protection.
Does the section 200A presumption apply to commission reps?
It can. Section 200A of the Labour Relations Act (and section 83A of the BCEA) presumes a person who earns below the determined earnings threshold to be an employee if any one of seven listed factors is present — such as control over their work or hours, integration into the business, or economic dependence. The onus then shifts to you to prove the rep is a genuine independent contractor.
Does commission count as part of an employee’s wage under the BCEA?
Yes. For an employee, commission is a quid pro quo for services and forms part of remuneration under the Basic Conditions of Employment Act. That matters for leave pay, notice pay and severance, which on fluctuating commission are typically calculated on the average over the preceding 13 weeks. Commission also counts towards (but cannot be used to dip below) the minimum wage.
Can I claw back commission if a customer cancels or does not pay?
Only if your agreement provides for it. Clawbacks, charge-backs and reversals on cancellations, returns, refunds or bad debts must be set out expressly, including the mechanism for recovering commission already paid. Without a clawback clause you may have no clear contractual right to reverse commission once it has been earned and paid.
Should the agreement include a restraint of trade and POPIA terms?
For a sales rep, yes. A reasonable restraint and non-solicitation clause protects your customer connections and pricing when the rep leaves, and is enforceable where it protects a legitimate interest and is not broader than necessary. Where the rep processes customer personal information for you, POPIA operator obligations should bind them, since a contractor is not covered by your internal staff policies.
Sources & authority
- Redelinghuys v Adapt IT (Pty) Ltd (C199/2019) [2023] ZALCCT 10; [2023] 7 BLLR 678 (LC); (2023) 44 ILJ 1590 (LC) (27 March 2023)
- State Information Technology Agency (SITA) (Pty) Ltd v CCMA and Others (JA 16/2006) [2008] ZALAC 1; (2008) 29 ILJ 2234 (LAC)
- Labour Relations Act 66 of 1995, s 200A (and Basic Conditions of Employment Act 75 of 1997, s 83A)
- Basic Conditions of Employment Act 75 of 1997, s 35 (calculation of remuneration; commission as part of remuneration)
This guide is general information, not legal advice. It reflects the law as at June 2026.