Commission pay in Canada is compensation an employee earns based on sales, revenue, contracts or other agreed performance results.
Your employer must pay commissions that you have legally earned. The important question is often when the commission becomes earned under your employment contract or commission plan. A sale can happen today while the commission becomes payable later after delivery, customer payment or another agreed event.
Commission income also matters when your job changes or ends. A significant commission cut can amount to constructive dismissal, and regular commission earnings can form part of the compensation you are owed after termination.
On This Page:
- 1. How Commission Pay Works
- 2. When a Commission Is Earned
- 3. Commission Pay & Minimum Wage
- 4. Can Your Employer Change Commission Pay?
- 5. Commissions After Termination
- 6. What to Do About Unpaid Commissions
- 7. FAQs
How Does Commission Pay Work in Canada?
Commission pay is usually calculated using a formula agreed to between the employee and employer.
For example, an employee might receive:
- A percentage of each sale
- A percentage of revenue above a target
- A fixed payment for each completed transaction
- Different commission rates after reaching certain sales levels
Employees can be paid entirely by commission or receive commission on top of a base salary.
The commission plan should explain how the amount is calculated, when it becomes earned and when it is paid. Those terms can become extremely important if a customer cancels, a sale closes after you leave or your employment ends before payment.
If commission forms a major part of your compensation, make sure the arrangement is clearly addressed in your employment contract or written compensation plan.
When Is a Commission Legally Earned?
A commission becomes earned when the requirements in your employment agreement or established commission plan have been satisfied.
That does not always happen on the date you make the sale.
For example, a commission plan can provide that the commission becomes earned when:
- The customer signs the contract
- The product is delivered
- The service is completed
- The customer pays the invoice
- Another clearly defined condition is satisfied
Once a commission is legally earned and payable, an employer cannot simply keep it because the employee resigns or is fired.
What if the commission agreement is unclear?
The wording, past payment practice and surrounding circumstances all matter. An employer should not be able to invent a new condition after the work has already been done.
What if the customer pays after you leave?
You can still be entitled to the commission if the applicable plan makes it payable after the customer pays and you completed the work required to earn it.
The fact that payment arrives after your employment ends does not automatically erase an earned commission.
Do Commission Employees Still Have Minimum Wage Rights?
Yes. Being paid by commission does not automatically remove an employee’s minimum employment standards.
Provincial rules differ, and some occupations have specific exemptions. But employees who are covered by minimum-wage legislation cannot simply be paid below the applicable minimum because their sales were poor.
British Columbia, for example, expressly requires commission employees covered by its Employment Standards Act to receive at least minimum wage for all hours worked. Ontario also applies employment-standards rules to employees paid fully or partly by commission, subject to specific exemptions for certain occupations.
Can you be paid only by commission?
Yes. Commission-only employment is legal where the arrangement complies with the employment standards that apply to your job.
The employer still has to follow applicable rules dealing with minimum wages, overtime, vacation pay and other employment standards unless a valid exemption applies.
Can Your Employer Reduce or Change Your Commission?
An employer can propose a new commission structure, but a substantial unilateral reduction to your compensation can amount to constructive dismissal.
Pay is a fundamental term of employment. A major reduction can occur through:
- A lower commission percentage
- Higher sales targets
- Removing major accounts or territories
- Changing which transactions qualify for commission
- Removing base salary and moving to commission-only compensation
A small change does not automatically create a legal claim. The issue is whether the employer has made a substantial negative change to the compensation you agreed to.
A substantial unwanted compensation change can lead to constructive dismissal, which can allow a non-unionized employee to treat the employment relationship as terminated and pursue severance.
Do You Get Commissions After Termination?
Yes. You can be owed both commissions already earned before termination and commission income you would have received during your legal notice period.
These are two different entitlements.
1. Commissions earned before termination
Your employer must pay commissions that became legally earned and payable under the applicable compensation terms.
A termination does not allow an employer to simply confiscate wages you had already earned.
2. Commissions during your severance period
If commission was a regular part of your compensation, common-law severance can include the commission income you would likely have earned during the reasonable notice period.
Courts can estimate that amount using the employee’s historical commission earnings and other evidence showing what they were likely to earn.
There is no mandatory rule that every case must use a three-year average. The goal is to reach a reasonable estimate of the commissions the employee would have earned if proper notice had been provided.
For example, in Nassar v. Oracle Global Services, the Ontario Superior Court awarded commissions during the employee’s five-month notice period using his average commissions over the previous three years.
Can a commission plan stop payments when you are fired?
A contract can affect commission rights after termination, but the limiting language must be legally enforceable.
Don’t assume words such as “actively employed” automatically eliminate your common-law rights. The employment contract, commission plan and applicable employment standards law must be reviewed together.
For many non-unionized employees, full severance pay is substantially greater than employment-standards minimums and can include commission, bonus and other regular compensation. It can climb as high as 24 months’ pay.
What Should You Do If Your Employer Has Not Paid Your Commission?
Start by determining whether the commission has actually become earned under your agreement and documenting the transactions involved.
- Get the commission plan. Keep every version that applied during the relevant period.
- Identify the triggering event. Determine whether commission is earned at sale, delivery, payment or another point.
- Keep transaction records. Save sales reports, account records, emails and commission statements.
- Compare previous payments. Past practice can help explain how unclear commission terms were actually applied.
- Ask for the calculation in writing. If commission has been reduced or withheld, ask the employer to explain why.
- Get legal advice before resigning or signing a release. Unpaid commission can overlap with constructive dismissal, severance or wrongful dismissal rights.
What if your employment has already ended?
Review unpaid commissions and your severance package together. Your final pay and your full termination entitlement are not necessarily the same thing.
An employer can pay outstanding wages correctly and still offer an inadequate severance package that fails to account for future commission income.
Commission Pay FAQs
Can my employer refuse to pay my commission after I quit?
Not simply because you quit. If the commission was legally earned under your agreement, it can still be payable after your employment ends.
Can my employer change my commission rate?
It can propose a change. A substantial unilateral reduction to your overall compensation can amount to constructive dismissal.
Are commissions included in severance?
Yes, when commission is part of your regular compensation. Severance can include commissions you would have earned during the notice period.
Can an employer take back a commission?
Only where the agreement and applicable law permit it. An employer cannot simply reclaim legally earned wages without a valid basis.
How are commissions calculated for severance?
Courts look at the evidence of what you likely would have earned. Historical commission averages are commonly used when future earnings cannot be calculated precisely.
Commission disputes can involve much more than a missing payment. A major commission cut can affect whether you have been constructively dismissed, while a termination can create additional rights to future commission income during your severance period.
Samfiru Tumarkin LLP advises non-unionized employees in Ontario, Alberta and British Columbia on unpaid compensation, commission-plan changes, constructive dismissal and severance.
Before resigning over a pay change or signing a termination release that excludes commission income, have your compensation rights reviewed by one of our employment lawyers to get what you’re owed.