The Minimum Wage Ordinance, Cap. 608

Reckoning and payment arrangement of commission

Q1 :

How is commission counted under the SMW regime?

A1 :

According to the Employment Ordinance, the definition of wages includes commission (except commission which is of a gratuitous nature or which is payable only at the discretion of the employer). Hence, other than commission which is gratuitous or payable only at the discretion of the employer, commission is wages and must be paid in accordance with the provisions of the Employment Ordinance. Subject to the provisions of other legislation, employers and employees may agree on how commission is calculated and payable in their employment contracts.

In determining whether the wages of an employee meet the minimum wage requirement, commission payable under the contract of employment is counted as wages payable in respect of the wage period as specified in the employment contract. If commission is payable in respect of a number of wage periods according to the contract of employment, in determining whether the wages of an employee meet the minimum wage requirement, commission is counted as wages payable in respect of the corresponding wage period as provided in the contract of employment.

In addition, given the unique nature of commission, the Minimum Wage Ordinance sets out the following provision for employers and employees to apply in the counting of commission as wages payable :

For the purpose of computing the minimum wage, any commission paid

with the prior agreement of the employee
at any time after the first 7 days of a wage period but before the end of the 7^th day immediately after that wage period

must be counted as part of the wages payable in respect of that wage period irrespective of when the work is done or the commission is otherwise payable under the contract of employment.

Hence, in determining whether the wages of an employee meet the minimum wage requirement, if there is prior agreement of the employee, commission can be counted as part of the wages payable in respect of a wage period according to the timing when the commission is paid. Without the prior agreement of the employee, the above provision is not applicable. In applying the provision, employers have to comply with the provisions on wage payment and deductions under the Employment Ordinance. Please refer to A Concise Guide to the Employment Ordinance published by the Labour Department for details.

Q2 :

Can commission be paid in advance? Any example to illustrate how commission is counted under the SMW regime as wages payable in respect of a wage period according to the timing when it is paid?

A2 :

As explained in Q1, according to the Minimum Wage Ordinance, in determining whether the wages of an employee meet the minimum wage requirement, an employer can, with the prior agreement of the employee, pay the employee commission in advance so that it will be counted as wages payable in respect of the wage period when it is paid.

Example:
An employee’s wage period is a calendar month. With the prior agreement of the employee, the employer pays him commission of $1,500 and $2,000 on 30 April and 6 June respectively. The commission is originally payable in respect of the wage period of July.

In this example, in accordance with the Minimum Wage Ordinance, with the prior agreement of the employee, commission paid in the period of 8 April to 7 May is counted as wages payable in respect of April (commission is paid on 30 April); and commission paid in the period of 8 May to 7 June is also counted as wages payable in respect of May (commission is paid on 6 June).

Thus, in determining whether the wages of this employee meet the minimum wage requirement, the commission of $1,500 is counted as wages payable in respect of April and the commission of $2,000 is counted as wages payable in respect of May, both not being regarded as wages payable in respect of July.