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Commission-only sales employment

My client is looking to employ sales staff, but as a startup is only able to pay commissions, not a salary. What is the best basis to employ these people on, and what are the consequences of the new European legislation on sick pay, holiday pay etc? One sales candidate wants to work on a self-employed basis - how does this affect the company as far as IR35 is concerned?
Tom Foale

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05th Sep 2002 07:58

Thanks for your help
Thank you both for your help. This has helped to clarify the situation for us.

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05th Sep 2002 10:46

Clarification
Sorry John, should have clarified s.134 ITCA applies to 'agency' staff who are self-employed.

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05th Sep 2002 09:58

Question for Rebecca
Rebecca, I didn't understand the point about the company being responsible for tax and NI if the salesperson was self-employed. I thought that self-employment would have made the salesperson responsible, and that this was the whole idea. I'm late to the whole IR35 debate, but it think I may have some issues that need clarifying with regard to comm-only.

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04th Sep 2002 12:09

Revenue guidance
The Revenue has accepted in some cases that commission-only insurance salespeople and commission-only double glazing salespeople are self-employed. One of the factors that has influenced the decision is where the number of hours worked is left to the discretion of the individual so that what they earn is directly related to the way they organise themselves and the effort they are prepared to make. It might also be helpful to look at:

http://www.inlandrevenue.gov.uk/manuals/esmmanual/part1000/esm1041.htm

Where it states:
“On the other hand, where an individual is paid entirely by commission but has to meet expenses to undertake the work this involves real financial risk which is a strong pointer to self-employment.”

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03rd Sep 2002 10:45

National Minimum Wage
Commission-only earnings are stumped by National Minimum Wage legislation. However, you can have something called a 'Fair Estimate Agreement'. This way you can top up the commission earnings if they are below the NMW threshold for the months work.

If the sales candidate wants to be self-employed then the usual status enquiry would apply. I would, however, think it unlikely that this position would be one of self-employment. IR35 does not come into the equation unless the sales person forms a limited company.

Don't forget if the salesperson is self-employed the company would be responsible for tax and NI under s.134 ICTA 1988 but, if the salesperson is a limited company the worker is responsible for tax and NI.

Rebecca Seeley Harris
Author of the Employment Status Guide
Seeley (Legal) Solutions

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