Bonuses
Bonuses and commissions can be contractual entitlements or discretionary. Even a discretionary bonus cannot always be withheld at will. We can tell you whether you are entitled to a payment and how to recover it.
Most employees are paid an hourly rate or a salary. Many are also paid a bonus or commission based on results: a sales assistant with a commission on sales, a manager with an annual bonus tied to targets, or an executive with shares or options that vest over time.
Disputes usually arise at two points: when the employer decides not to pay a bonus you believe you earned, and when you leave before the bonus is paid or your shares vest. The answer almost always depends on the exact wording of your contract and any bonus plan or policy, so keep copies of every document that mentions your bonus, including emails setting your targets.
I'm Being Paid A Base Rate But Can Be Eligible For Bonus Payments On Top In Certain Situations. Is This Legal?
Yes, in most cases. The Fair Work Act 2009 (Cth) does not prohibit incentive payments, and it treats them as part of your pay once they are payable: s 323 requires amounts payable for your work, including incentive-based payments and bonuses, to be paid in full, in money, and at least monthly.
If an award or enterprise agreement covers you, your base rate must still be at least the minimum rate for your classification, and you must still receive penalty rates, overtime and allowances. A bonus generally cannot be used to make up for a base rate that is below the award, unless the payment was made for the same purpose as the award entitlement, which is a question that depends on your contract.
What About When An Employee Is Being Paid By Commission Or Bonuses Only?
Being paid only by commission or bonus can be lawful in limited situations. If a modern award or enterprise agreement covers you, it will be lawful only if the award or agreement allows it, and on the conditions it sets. If you do not know which award covers you, the Fair Work Ombudsman's Pay and Conditions Tool is a good place to start, and we can help.
If no award or agreement covers you:
- commission-only pay can be lawful if what you are paid still meets the national minimum wage for the hours you work ($26.44 an hour from 1 July 2026, or $33.05 an hour for casuals); but
- if a commission-only arrangement leaves you with less than the national minimum wage, you have been underpaid. See I've Been Underpaid.
Lower minimum rates can apply to junior employees, apprentices, trainees and employees on the supported wage system.
If you are genuinely an independent contractor rather than an employee, different rules apply. But calling a commission-only salesperson a contractor does not make them one: the question is decided on the real substance of the relationship (s 15AA). See our page on contractors.
I Think I'm Entitled To A Bonus Payment Under My Employment Contract, But My Employer Says The Bonus Is Only Discretionary And Won't Pay It. What Can I Do?
Is It An Entitlement Or A Discretion?
Start with the words. If your contract says you "will" be paid a bonus of a set amount or by a set formula when you meet set targets, the bonus is likely to be a contractual entitlement, just like your salary. If it says the employer "may" pay a bonus "at its absolute discretion", the employer has a choice, but that choice is not always unlimited.
Limits On A Discretion
Where a bonus is part of what you bargained for and is assessed against set objectives, courts have held that the employer cannot use a discretion to withhold it capriciously, arbitrarily or unreasonably. If the parties intended the bonus to be wholly gratuitous and withholdable even after the objectives were met, they needed to say so clearly: Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357; Foggo v O'Sullivan Partners (Advisory) Pty Ltd [2011] NSWSC 501.
A truly ex gratia payment is different. The constraint is much looser, and an employer can attach conditions, such as signing a release, provided it does not act in bad faith: McKeith v Royal Bank of Scotland Group plc [2016] NSWCA 36.
Bonuses, Commission And Leaving Your Job
Many bonus plans say you must still be employed on the payment date. How that works depends on the wording: for example, a court has refused to read a condition tied to a year's work as allowing an already-awarded bonus to be deferred for years and then forfeited if you had left by then (Crowe Horwath (Aust) Pty Ltd v Loone [2017] VSCA 181). Commission you have already earned generally cannot be withheld because of an unrelated breach unless your contract expressly allows it. Share and option plans usually have detailed "good leaver" and "bad leaver" rules, and whether you are a bad leaver turns on what actually happened, not on what the company believes.
How To Recover An Unpaid Bonus
An unpaid contractual bonus or commission is usually recovered as a debt or a claim for breach of contract. If you are in the WA state system, a claim for a contractual benefit such as a bonus can be referred to the WA Industrial Relations Commission as a denied contractual benefits claim. See denied contractual benefits.
Because every clause is different, personal legal advice is important. We can review your employment contract and bonus plan and tell you whether you are likely to be entitled to the payment. Contact us for a free confidential discussion.
Case studies
How the law played out in real cases
Published decisions of courts and tribunals, summarised in plain English from the published decision. Every case turns on its own facts.