Some questions linger with regards to the legal employment status of an employee who is remunerated on a 100% commission basis, especially during the COVID-19 lockdown. The question of whether a commission-based employee is considered an employee is a prevalent one, especially in the South African employment environment where many employers try to circumvent he Labour Relations Act (LRA) in how they describe persons who perform services to their business. (Also read: “The Perpetual Independent Contractor,” 12 March 2020.)
According to Section 1 of the LRA, an employee is defined as:
Any person, excluding an independent contractor, who works for another person, or for the State, and who receives, or is entitled to receive, any remuneration, and any other person, who in any manner, assists in carrying on or conducting the business of an employer.
In addition, Section 83A of the Basic Conditions of Employment Act states that a person is presumed to be an employee of any other person to for whom they work or to whom they render services until the contrary is proven, regardless of the form of contract, if one of the following factors are present:
- the way in which the person works is subject to the direction or control of another person
- the person’s working hours are subject to the control or direction of another person
- where a person works for a business or organisation, the person is a part of that business or organisation
- the person has worked for another person an average of 40 hours per month for the preceding 3 months
- the person is economically dependent on the person for whom they work or renders services
- the person is provided with tools or equipment with which to perform the work or services by the other person
- the person only works for or renders services to 1 (one) person,
These factors are referred to collectively as the “Section 83A Presumption.” This presumption is however not applicable to person who earn above the threshold of R205 433.30 per year, as per section 6(3) of the Basic Conditions of Employment Act.
A commission-only employee is a person who derives their entire income from the commission they earn on the work performed or services rendered to another person.
Commission-only employees typically have flexible working times and the way their work is performed, or services rendered may be left to the employee’s discretion and are not usually controlled by the employer. The BCEA does not, however, set a required minimum time that an employee must work and only provides for limits on work time in terms of chapter 2 of the Basic Conditions of Employment Act.
Considering the application of the Section 83A Presumption, a commission-only employee will likely meet the basic requirements to be deemed an employee. Therefore, employers must ensure that commission-only employees are provided the minimum rights as per the Basic Conditions of Employment Act.
In terms of the COVID-19 lockdown, it is important to keep in mind that according to the National Minimum Wage Act (NMWA) of 2018, all commission based employees are legally entitled to receive at least the minimum wage and the commission payment in terms of their agreement with the employer. Section 3 of the NMWA provides that the laws relating to minimum wages apply to all employees and their employers. This means that every employee is entitled to receive no less than the national minimum wage. The Act takes precedence over any contrary provision in any contract of employment and cannot be waived. Thus, commission-only employees are entitled to some form of income during this lockdown whether from mandatory paid annual leave or through the COVID-19 Temporary Employer/Employee Relief Scheme (TERS).