Can An Employer Change Commission Plans In NZ?

Yes, an employer can change a commission plan in New Zealand, but not always unilaterally. If the commission structure is part of an employee's employment agreement or has become an agreed term of their role, you'll usually need the employee's informed agreement before you change it.

The more the change affects pay, the more careful you need to be. Commission is often a big part of what motivates sales staff, so a rushed change can create contract issues, trust problems and personal grievance risk.

The good news is that this doesn't have to be messy. With clear documents, proper consultation and a sensible transition plan, you can update your commission structure while protecting your business and keeping expectations clear.

Can You Change A Commission Structure Without Employee Agreement?

Usually, no - not if the commission structure is an agreed employment term. Under the Employment Relations Act 2000, you need to act in good faith and you can't simply remove or reduce agreed pay entitlements because the old plan no longer suits your business.

A commission arrangement may be an agreed term if it's set out in:

• the employee's individual employment agreement
• a signed employee commission agreement or sales commission contract
• bonus plan rules or an incentive plan that the employment agreement incorporates
• a written variation letter or email exchange that clearly records agreement
• a long-running practice that both sides have treated as binding

If you cut commission without agreement, the employee may argue that you've breached their employment agreement or unjustifiably disadvantaged them. In practical terms, that can mean a personal grievance, lost time, legal costs and damage to team morale.

The safest approach is to first work out whether the current commission plan is contractual. Look at the wording, how the plan was introduced, whether employees signed it, and whether you've reserved a genuine right to change it.

If you're not sure, treat the change as requiring consultation and written agreement. That usually puts you in a much better position than assuming you can change the plan and dealing with pushback later.

What If The Commission Plan Says You Can Change It?

It depends on the wording. A well-drafted commission plan may let you update targets, territories, product lists or commission rates, but that doesn't mean you can make any change you like at any time.

Common clauses that may help you make changes include:

• Discretionary bonus wording: this says the bonus or commission isn't guaranteed and is paid at the business's discretion.
• Plan amendment wording: this gives your business a right to change, suspend or withdraw the plan, often with notice.
• Target-setting wording: this lets you set or reset sales targets, KPIs or revenue thresholds for each commission period.
• Eligibility wording: this sets conditions such as being employed and not under notice on the payment date.
• Manager approval wording: this says a sale is only commissionable once it's approved, invoiced or paid by the customer.

Even with these clauses, you still need to exercise your rights fairly and in good faith. A clause that allows reasonable changes to next quarter's targets is very different from a clause that lets you cancel commission already earned.

For example, if your plan says commission is earned when a customer pays the invoice, you may be able to change future rates for future sales. But if an employee has already closed a deal and all conditions have been met, trying to remove that commission after the fact is much riskier.

Clear wording matters. Vague phrases like management may change the scheme at any time can help, but they don't always solve the whole problem. You still need to consider the employment agreement, the employee's reasonable expectations and the way you've applied the plan in practice.

When Do You Need To Consult Staff About Commission Changes?

You should consult when the change could negatively affect pay, workload, targets or how an employee earns commission. Consultation is especially important if the change is significant, even if you believe your documents give you some flexibility.

Good faith under the Employment Relations Act 2000 requires more than simply announcing the new plan. You should give employees enough information to understand the proposed change, give them a real chance to comment and consider their feedback before making a final decision.

A practical consultation process could look like this:

1. Explain the business reason: for example, margin pressure, new products, changed sales cycles or a shift from individual to team selling.
2. Show the proposed structure: include rates, thresholds, examples and when the plan would start.
3. Explain the impact: be upfront about who may earn more, who may earn less and what assumptions you've used.
4. Invite feedback: give a reasonable timeframe for comments and questions.
5. Consider alternatives: record what feedback you accepted, rejected or adjusted.
6. Confirm the final decision in writing: include the new terms, start date and transition arrangements.

How long consultation takes depends on the size and impact of the change. A small tweak to reporting deadlines may only need a short discussion. A major reduction in commission potential should be handled more carefully and with more time.

If the change affects an employee's agreed remuneration, consultation alone may not be enough. You'll still need their written agreement to vary the employment agreement or commission contract.

Can You Change Commission For Future Sales Only?

Yes, changing commission for future sales is usually much easier than trying to change commission that has already been earned. The key is to draw a clean line between old and new arrangements.

Commission disputes often happen because the plan doesn't say when commission is earned. Is it when the employee books the meeting, signs the customer, invoices the customer, receives payment, finishes onboarding, or after the refund period ends?

Your plan should answer that clearly. Otherwise, an employee may say they earned commission before the change date, while your business may say it was only payable later.

Worked Example

Say Ana runs a Wellington software business. Her sales employee, Josh, is on a base salary plus 8% commission on annual subscription revenue. Under the current plan, commission is earned when the customer signs the order form and is paid in the next payroll.

Josh closes a $50,000 annual subscription on 20 March. His commission would be $4,000. Ana then announces on 25 March that, from 1 April, commission will drop to 5% and will only be paid once the customer pays the invoice.

Ana can usually apply the new 5% structure to sales made from 1 April, if she follows the right process and gets any required agreement. But she shouldn't try to apply the 5% rate to Josh's 20 March sale if the old plan says he already earned 8% when the order form was signed.

A fair transition clause could say:

• sales signed before 1 April remain under the old plan
• sales signed on or after 1 April fall under the new plan
• renewals, expansions and split deals are handled under stated rules
• any disputed deal allocation will be decided under a clear internal process

This kind of detail may feel fiddly, but it prevents arguments about edge cases. It also helps your sales team focus on selling instead of guessing how they'll be paid.

How Should You Document A New Commission Agreement?

You should document the new commission terms in writing, with enough detail that a manager and an employee can both calculate the same outcome from the same sale. A short email can be risky if the commission structure has moving parts.

Your options usually include:

• a standalone commission agreement for the relevant sales role
• a commission schedule attached to the employment agreement
• a written variation to the employment agreement
• a policy-style incentive plan, if the bonus is genuinely discretionary

Templates can be a useful starting point, but commission plans are very specific to your sales cycle, pricing model and payment triggers. Have a lawyer tailor the document before you use it, especially if commission makes up a significant part of remuneration.

Commission Agreement Outline

Here's a fill-in outline you can use to think through the structure. It's not a finished legal document, but it shows the sections your agreement should usually cover.

1. Parties And Role: state who the plan applies to and the employee's sales role.
2. Plan Period: set the start date, review date and whether the plan applies monthly, quarterly or annually.
3. Eligible Sales: define which products, services, territories and customers count.
4. Commission Rate: set the percentage, fixed amount, tier or formula.
5. Targets And KPIs: explain any thresholds that must be met before commission is payable.
6. When Commission Is Earned: state the trigger, such as signed contract, invoice issued or customer payment received.
7. Payment Timing: explain which pay cycle commission is paid in and what information will appear on payslips.
8. Adjustments And Clawbacks: cover refunds, cancellations, bad debts, credits, churn and overpayments.
9. Leave And Employment Status: explain what happens during leave, suspension, resignation or notice periods.
10. Plan Changes: set out how future changes will be made, including notice and agreement where needed.

You should also check the plan against minimum employment standards. Commission arrangements can't take an employee below minimum wage for the hours they work. Holiday pay calculations under the Holidays Act 2003 may also need to account for regular commission when working out relevant leave payments.

If you want to recover overpaid commission or claw back amounts, be careful. The Wages Protection Act 1983 restricts deductions from wages, and you generally need proper written consent for deductions. A broad clawback clause won't always be enough if the deduction process isn't handled correctly.

What Mistakes Create Personal Grievance Risk?

The biggest risk is treating commission as a flexible perk when your documents or conduct make it part of agreed pay. If the change disadvantages an employee and the process is unfair, a personal grievance can follow.

Common mistakes include:

• Changing rates without checking the employment agreement: your contract may lock in the old structure or require agreement for changes.
• Announcing the change as final before consultation: this can make the process look predetermined.
• Backdating a new plan: this can interfere with commission employees have already earned.
• Using unclear earning triggers: unclear rules create disputes about whether a deal is commissionable.
• Forgetting leave and minimum wage issues: commission plans still sit inside employment law, including the Minimum Wage Act 1983 and Holidays Act 2003.
• Applying rules inconsistently: if two employees close similar deals but you treat them differently, you'll need a good reason.
• Moving staff to contractor arrangements without a contractor agreement review: changing an employee into a sales contractor isn't just a commission plan change.

That last point is worth pausing on. From 2026, the Employment Relations Amendment Act 2026 introduced a contractor gateway test for some worker status questions. If you're engaging sales contractors under a sales agency agreement, the written agreement, how the arrangement works in practice and the statutory criteria all matter. But a gateway test doesn't mean you can relabel an employee as a contractor just to avoid commission, leave or other employment obligations.

If something has already gone wrong, start by gathering the documents and communications. Keep copies of the employment agreement, commission plan, payslips, sales reports, consultation notes and any messages about the change. Then pause any further deductions or disputed commission decisions until you've checked your position.

Often, the best fix is a clear written variation and a sensible transition arrangement. The earlier you address it, the easier it's to preserve the relationship and reduce the chance of a formal claim.

Key Takeaways

• You usually need employee agreement to change a commission structure if it's part of their employment agreement or agreed pay package.
• A variation or discretion clause can help, but it doesn't let you act unfairly or remove commission that's already been earned.
• Consultation matters when the change affects pay, targets, territories or earning potential.
• Your new commission plan should clearly define eligible sales, rates, earning triggers, payment timing and clawbacks.
• Keep future changes separate from past sales so employees know which plan applies to which deal.
• Check minimum wage, holiday pay and deduction rules before rolling out the new structure.

If you'd like help with your commission agreements, employment agreement variations, sales incentive plans or consultation documents, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.