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What is Commission Pay?
Commission pay is a form of compensation based on the performance of an employee, typically in sales roles. It is often calculated as a percentage of the sales or deals closed by the employee. Unlike a fixed salary, commission pay provides an incentive for employees to increase their productivity and achieve higher sales. Understanding what commission pay is can help employees know their earning potential and structure their work to maximize their income.
When are commissions considered wages?
When an employee’s employment ends, they are entitled to any wages owed, but questions often arise about whether earned commissions or bonuses fall into this category.
A recent case in Calgary, Alberta has given some clarification about when commissions will be considered ‘wages’ under Alberta’s Employment Standards Code.
Background
The employer is a crude oil brokerage business that pays its Energy Brokers base salaries plus brokerage commissions, which make up the vast majority of their compensation. These commissions were paid on a quarterly basis, payable six weeks after the end of the applicable quarter. The quarterly commission payments were also subject to a 25% holdback, payable at year-end.
Two brokers resigned in the middle of Q2, immediately after receiving their Q1 commissions. They filed an Employment Standards complaint seeking payment of the 25% hold back for their Q1 commissions and commissions for transactions brokered in Q2 before they resigned.
The Decision
Following a decision in favour of the former employees, the employer appealed to the Appeal Body. The Appeal addressed whether the claimed amounts were “wages” under the Code.
The employer argued that the unpaid commissions were not “wages”, but were a discretionary bonus based on the employment agreement wording describing them as a “bonus, amount to be negotiated with Management.” Under the Employment Standards Code, discretionary bonuses are not “wages” and are not subject to the protections for “wages” under the Code.
The Appeal Body disagreed with this argument, pointing out that the commissions were based on a fixed percentage formula and were paid on a consistent quarterly schedule, which falls within the definition of “wages.” This demonstrates how courts and tribunals will go beyond the words of an agreement and consider the actual practices.
However, the Appeal Body found that “wages” are paid for work, which created a distinction between the 25% holdback and commissions for transactions brokered in the first half of Q2.
- 25% holdback: The Appeal Body found the former employees had worked all of Q1 and provided all services necessary. So the Appeal Body declared the 25% holdback as “wages” and ordered these amounts payable to the employees.
- Q2 commissions: The Appeal Body determined the employees had not carried out all the duties of their role through the entire quarter and therefore hadn’t “earned” their commission, so these amounts were not “wages” and were not owed to the employees.
The takeaways:
This may not be the last determination on this issue, but here are a couple lessons:
- A commission that is based on a fixed formula and paid at regular intervals is not a discretionary bonus, even if that is how it is described in the employment contract.
- When a commission corresponds with payment for a particular service, this payment will not be considered “wages” under the Code unless the service is fully delivered.
These learnings are dependent on the particulars of this specific case, so if your former employer is denying payment of a commission or bonus after the end of your employment, contact Cashion Legal for a consultation. We can help determine whether you have a case based on your specific circumstances.
Why You Should Speak to an Employment Lawyer About Commissions
Whether you’re still employed or have recently left your job, unpaid commissions can raise serious questions about your rights, and your income. If you’re unsure whether a withheld bonus or commission qualifies as “wages” under Alberta law, it’s time to talk to a lawyer.
At Cashion Legal, we help employees across Alberta determine what they’re owed and how to get it.
What Legal Support Can Do For You
Clarity
Workplace pay disputes can feel overwhelming and uncertain. We help you make sense of what’s happening by explaining how the law applies to your case and outlining practical next steps.
Peace of Mind
Employment matters can be stressful, especially when money is involved. We approach every case with care, honesty, and respect so you feel confident knowing your situation is being handled properly.
Strategy
We help you choose a path forward that aligns with your goals. Whether it’s direct negotiation, filing a complaint, or going to court, we tailor your legal strategy to protect your income and peace of mind.
Book a consultation with Cashion Legal to understand what your commissions are worth, and how to collect them.
FAQ: Commission Pay and Employment Law in Alberta
Can my employer withhold earned commissions after I resign?
In Alberta, employers may withhold commissions if the service or sale tied to those commissions was not fully delivered before your resignation. However, if the work was completed, and there is no specific agreement stating otherwise, you are generally entitled to the commissions owed. Always review your employment contract for any relevant terms.
What if my commission is called a bonus in the contract?
Even if your commission is labelled as a “bonus,” it may still be considered commission pay if it’s tied to specific sales or performance targets.
Do I need to complete the entire quarter to earn a commission?
In Alberta, whether you need to complete the entire quarter to earn a commission depends on your contract terms. If your agreement specifies that commissions are only earned after completing a full quarter, then that condition applies. However, if there’s no such clause, you may be entitled to a commission for sales made during your employment, regardless of the quarter’s duration.