Commission can be paid to an independent contractor

Commission: definition, types, tax

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A commission is common in many industries. Brokers or car salesmen, for example, receive one if they have successfully brokered a business between the company (or client) and customers. The commission is a performance-related payment. In this way, the motivation of the employees can be promoted, as they can immediately feel the financial success of their efforts. Here we explain what you need to know about performance-related remuneration, what the legal basis is and how you have to pay tax on a commission ...

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➠ Content: This is what awaits you

Definition: what is a commission?

The term commission comes from the Latin verb providere and means something like "provide for" or "provide for". This term is also used in English, where it has the meaning of "provision". To put it simply, a commission is a performance-related fee that is generated through business brokerage. It is usually measured on the basis of a certain percentage of the sales price. The agent receives this money as soon as the product or service is sold. There are always three business parties involved:

➠ Company / client
➠ customer
➠ Intermediary / sales representative / sales representative

Depending on the industry, there are synonymous terms such as brokerage (in a different spelling also Kurtage), surcharge or agio. In contrast, from a purely legal point of view, bonuses, fees or royalties do not count as commission. According to German commercial law (Commercial Code), a commission is a success fee. Your payment depends on whether the person entitled to commission helps his client to make a profit.

What types of commission are there?

Not all commission is the same. There are different types of subdivision in banking or insurance, for example - depending on the service and business. The amount is based on the one hand on the scope of the financial transaction and on the other hand on the consulting effort. So it happens that the agent receives a high commission for taking out life insurance or other capital investments. However, this is not the case with a simple property insurance - even if the scope of the financial transaction is similarly high. A basic distinction is made between the following types of commission:

Closing commission

When concluding a financial transaction or selling a product, the initial commission is due. This type of commission is the most common and therefore usually the highest.

Inventory commission

If a contract runs for a long time, it also requires a certain amount of support from the respective agent - in insurance, for example, claims settlement. This is compensated with the so-called care or inventory commission.

Follow-up commission

If a multiple order is placed within a contract, the agent receives a so-called follow-up commission. If the customer extends the order, it is an extension commission.

Brokerage fee

In the area of ​​brokerage, the agency fee is called brokerage. This applies to services that take place in real estate trading, various service sectors or on the stock exchange.

Processing commission

If the agent has to perform special work within a business relationship, he will receive a separate fee as a processing commission.

One-time commission

With this type of commission, every further activity within the service agreed in the contract is compensated. The one-time commission includes the final commission as well as a flat rate for support, inventory, follow-up orders and processing costs.

Collection commission

At debt collection companies, employees receive so-called collection commission for the successful collection of outstanding debts on the part of the debtor.

Increase or dynamic commission

In the insurance sector in particular, the contributions sometimes increase regularly. This is also taken into account on the part of the agent: his entitlement to a commission also increases. He is entitled to an increase commission.

Legal regulation: when do you get the commission?

In addition to the details of business relationships, the Commercial Code (HGB) also regulates the commission. The seventh section of the HGB (Section 87) states that a merchant who performs a service or concludes a business for others, as an independent commercial agent, is generally entitled to an appropriate commission, provided that he acts on behalf of the client. The amount of the commission depends on the value of the contract. This can be, for example, the purchase price, the monthly contribution or rent, the loan amount or the like.

Due date

Entitlement to the commission exists only when the transaction is actually carried out. The commission is due on the last day of the month in which the contract is concluded. The entrepreneur has to pay them monthly or, at the latest, quarterly. If the entrepreneur does not meet his obligation, the commercial agent can legally claim his commission in the month after the business deal has been concluded. He is also entitled to request a book excerpt when settling the commission. In this way, he can check whether the commission has been fully and correctly settled. If the entrepreneur refuses to give him this excerpt, he can instruct an auditor to inspect the business books.

Omission

If the business relationship or the legally binding basis between the customer and the entrepreneur no longer applies, the right to commission for the commercial agent is also no longer applicable, despite the service provided. This is the case, for example, in the event of the customer's insolvency, withdrawal from the contract or termination.

Commission discount

A commission can also be omitted or reduced if the valuation basis changes. This is the case, for example, when the agent grants discounts to the customer. In the case of some business referrals, the broker even waives the commission entirely. This does not always accept the complete waiver; In some cases, the commission waiver is divided on a percentage basis among all commission participants.

How is the commission taxed?

Basically, the commission represents a taxable wage. Whoever receives it must therefore pay full tax on it, just like any other type of salary or income. You must specify one-off commission payments that have no specific reference to a wage payment period as other payments. Regular commissions are to be recorded as taxable income in the balance sheet or income statement (EÜR).

If the commission is paid as an employer in the context of employment, the employer is obliged to pay social security contributions and wage tax accordingly. In principle, sales tax is also applicable to commissions. The Value Added Tax Act (UStG), however, provides for some exceptions in accordance with Section 4 (8), which are tax-free in this context:

➠ banking and loan brokerage
➠ Insurance benefits and home loan and savings contracts
➠ Insurance brokerage and agent services

How can I calculate commissions?

The commissions are calculated differently depending on the industry. Basically, the more contracts a consultant concludes with the customer or the more customers he recruits, the higher the total amount of his commission. A commission can therefore significantly increase the motivation of employees in sales. You can see the success of your work and efforts directly on your financial income.

On the other hand, payment on a commission basis can prevent independent advice to the customer. Ultimately, the agent will focus on the products that will earn them the most commission in relation to the amount of work they do. The pure payment on a commission basis is therefore associated with risks for the employees. Since a commission only flows in the event of success, the employee has to include additional effort for non-target-oriented consultations in his calculation.

Entitlement to commission in the event of illness?

It is more difficult to calculate the commission entitlement in the event of illness or vacation. Commercial agents are generally not entitled to continued payment of wages in the event of illness. It is different with salaried sales staff. Here companies have to calculate what commissions would have been incurred if the employee had not been ill. The previous month or the last three months are too imprecise for a calculation. Instead, companies should determine a commission average from the past twelve months.

Special case: commission for short-time work

In uncertain times such as the Corona crisis, companies in many places register short-time work. Many employees in sales are dependent on commissions, as these represent an essential component of their salaries. The employees must continue to be there for their customers - even if it is only on call on the phone or for inquiries by e-mail. So the important question is how to calculate the short-time allowance in view of fluctuating commissions?

Unless otherwise determined, the short-time work allowance is calculated in the case of commission payments according to Section 106 of the Third Social Code (SGB III). This so-called net wage difference measures the average wage over the last three months. On this basis, an average value can also be calculated in the case of commissions, which in turn represents the basis for the short-time work allowance.

However, anyone who works as a commercial agent in accordance with Section 87 of the German Commercial Code (HGB) is not entitled to short-time work benefits as a self-employed person - he must therefore apply for other support or find ways of being able to exercise his profession accordingly. First of all, a conversation with the entrepreneur is essential.

In which professions is a commission paid?

A salary can consist of several components: a fixed fixed amount and, depending on the success, additional commissions. In other jobs, however, you only pay based on success: They run exclusively on a commission basis.

The commission occurs primarily in professions in which commercial transactions are carried out. This is due to the fact that in the case of a clearly measurable financial performance, the concept of a successful deal or business deal can be formulated unambiguously.

This mostly affects freelance commercial agents or brokers - for example in finance or real estate. Considerable commissions can accrue, especially for a successfully brokered apartment or house, depending on the financial scope of the deal.

However, the payment of commissions is not necessarily linked to self-employment. There are also many employees who earn a commission. Commissions are particularly common in these professions:

➠ Real estate agent
➠ Bank advisor and credit intermediary
➠ Insurance salesman
➠ Sellers on Ebay or other platforms
➠ Employment Agents

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