The most common associations with the term “commission-based remuneration” are “agent” or “agency agreement.” Of course, these associations are accurate and point to one type of contract in which commission-based pay is used. However, today commission-based remuneration does not have to be so closely linked to an agency agreement. Very often it also appears, for example, in B2B contracts concluded with sales representatives or in distribution agreements.
In business practice, commission-based remuneration occurs frequently and on a much broader scale than one might expect. On the one hand, the basis for its introduction is the agency agreement, but on the other hand, commission has become a common element of many other cooperation models—both those based on civil-law relationships and even employment relationships.
What is commission-based remuneration?
Commission-based remuneration (also referred to as a commission) consists in introducing into a contract a mechanism whereby the amount of remuneration is not fixed but depends on achieving a specific result. This result is usually a desired economic outcome, such as:
- generating a specified level of turnover
• acquiring a client
• concluding a contract
Thus, a characteristic feature of a commission is that it is not due merely for performing work or services, but only for achieving a specific outcome. The amount of the commission may be determined either as a percentage (e.g., of the value of generated turnover or sales) or as a fixed amount (e.g., PLN 100 for each acquired “lead”).
A commission may also serve as a motivational mechanism for the person remunerated in this way. The better the result achieved, the higher the remuneration. For this reason, commission-based pay is widely used in sales, real estate, and financial services.
Agency agreement – a model example of commission-based remuneration
Under statutory regulations, commission-based remuneration is encountered in an agency agreement. It is precisely in the provisions of the Civil Code that the legislator has expressly regulated the rules for paying commission to an agent.
An agency agreement is a named contract (i.e., regulated by statute). It consists in the agent acting within the scope of their business activity and intermediating in the conclusion of contracts on behalf of the principal or concluding such contracts in the principal’s name.
The key features of an agency agreement include in particular:
• acting on behalf of the principal;
• a certain continuity of cooperation (it is long-term, not a one-off assignment);
• commission-based remuneration (unless another form of remuneration has been agreed).
Is commission-based remuneration mandatory in an agency agreement?
No, this type of remuneration is not mandatory in an agency agreement. Under the regulations, if the method of remuneration has not been specified in the agreement, the agent is entitled to a commission.
Therefore, it is not the only permissible solution. The parties may agree on fixed remuneration, remuneration combining a fixed component and a commission, or yet another settlement model, provided that it is compliant with the law.
Can a commission be paid under an employment contract?
Yes, commission-based remuneration may be paid under an employment contract. It may constitute either the sole component of remuneration or a component supplementing the base salary.
However, it should be remembered that a commission paid to employees differs from an agency commission primarily in that this method of remuneration must ensure appropriate employee protection (e.g., compliance with minimum wage requirements).
Termination of the contract – what about the commission?
In practice, many doubts arise with regard to the payment of commission after the termination of a contract. In the case of termination of an agency agreement, whether by notice or by dissolution, commission-based remuneration may still be due, and this right follows directly from the Civil Code.
Generally speaking, a commission will be due to the agent even after the agency agreement has been terminated if the agent’s actions undertaken during the term of the agreement led to the conclusion of a contract with a client (the contract with the client was concluded during the term of the agency agreement or was concluded after its termination, but as a result of actions previously undertaken by the agent).
In the case of other contracts (e.g., B2B contracts with sales representatives, distribution agreements) that contain only elements of an agency agreement, it is advisable to include appropriate provisions in the contract itself regarding the payment of commission after termination. This helps avoid disputes related to the application (or non-application) of the provisions governing agency agreements.
