Commission vs Hourly Pay: Which Works Best for Your Team?

A Legally Compliant Guide for Australian Salon & Clinic Owners

Choosing how to pay your team is one of the biggest decisions you’ll make as a business owner. The right pay structure can attract great therapists, motivate high performance, and protect your business. The wrong one can lead to stress, underpayment, or legal risk.

Under Australian law, your pay model must comply with the Fair Work Act 2009, the National Employment Standards (NES), and the relevant modern award — most often the Hair and Beauty Industry Award (MA000005).
(Fair Work Ombudsman – Hair and Beauty Award)

This guide breaks down each pay structure, explains what’s legally required, and helps you design a system that’s fair, compliant, and motivating.

Understanding the Legal Framework

Before you decide how to pay your team, it’s essential to understand the legal foundation that governs beauty industry wages in Australia.

The Hair & Beauty Industry Award (MA000005)

This award covers most salons, spas, and clinics, setting out minimum pay rates, classifications, penalties, allowances, and overtime. It’s reviewed annually — usually effective from 1 July — and you must update your rates each year.
(Fair Work Pay Calculator)

Minimum Pay Guarantee

Even if you pay commission, your employee’s total earnings (commission + base pay) must always meet or exceed what they would earn under the award for the hours they worked — including overtime and allowances. If not, you must “top up” the difference.

Employment Types Matter

Full-time and part-time employees accrue paid leave and have set hours.
Casual employees receive a loading (often 25%) instead of leave entitlements.
Apprentices and trainees have special rates and training conditions.

Your pay structure must respect these classifications and entitlements.

Record-Keeping & Payslips

Fair Work requires you to keep records of hours, wages, commissions, allowances, and leave. Payslips must clearly show how each payment was calculated. Failure to do so can result in heavy penalties.

Hourly Pay (or Salary): Stability and Simplicity

How it Works:
Employees are paid a fixed hourly rate or salary, regardless of sales or client volume.

Benefits:

Predictable income for staff.
Easy to ensure compliance with award rates.
Builds teamwork and consistency.
Encourages therapists to focus on service quality.

Watch Out For:
You must still pay overtime, penalty rates (weekends, evenings, public holidays), and allowances correctly.

Best Practice Tip:
Combine hourly pay with small performance bonuses (for rebooking or client satisfaction) to reward initiative without compromising stability.

Commission Pay: Motivation with Caution

How it Works:
Therapists earn a percentage of service or product sales, sometimes instead of a base rate.

Benefits:

Motivates strong performers.
Can increase sales and client engagement.
Appeals to ambitious, target-driven staff.

Compliance Requirements:

You must prove that their total commission earnings meet or exceed the minimum award pay for all hours worked.
If not, you must top up to meet the award.
Commission agreements must be in writing and transparent.

Risks:

Income can fluctuate during quiet periods.
Can encourage unhealthy competition or over-selling if not managed ethically.

Tip: A pure commission model can be risky under the award — it’s safer to combine it with a base wage.

The Hybrid Model: The Best of Both Worlds

How it Works:
Employees receive a base hourly rate (meeting the award minimum) plus a small commission or performance bonus.

Benefits:

Provides financial security and motivation.
Easy to track and stay compliant.
Flexible for growing salons and clinics.

Compliance Notes:

Always specify how bonuses or commissions are calculated.
Review regularly to ensure total pay exceeds award entitlements.
Document clearly in the employment contract.

Many successful Australian salons use this model because it balances stability with reward — and aligns with Fair Work requirements when managed transparently.

Designing a Compliant Pay Model: Step-by-Step

Confirm the correct award — for most, that’s the Hair & Beauty Industry Award.
Classify each employee correctly (Level 1–6 or apprentice).
Set a base rate that meets or exceeds the award.
Add commission or bonuses as incentives, ensuring pay always exceeds the award minimum.
Include penalties and allowances per the award.
Document all terms in the employment contract.
Keep detailed records of hours, pay, and commissions.
Review rates annually (from 1 July each year).
Audit regularly to ensure you never underpay staff.

For an easy compliance check, use the Fair Work Pay and Conditions Tool (PACT).

Transparency Builds Trust

Whatever model you choose, explain it clearly to your team.
Provide written commission structures, realistic targets, and open access to performance reports.

Clarity builds trust — and trust builds retention.

Motivation Is More Than Money

Pay is important, but culture matters just as much.

Recognition, respect, and professional growth keep your team motivated long after bonuses are spent.
A supportive environment paired with fair pay builds loyalty — and that loyalty keeps your business thriving.

Final Thoughts

Choosing between hourly, commission, or hybrid pay isn’t about picking a “winner” — it’s about finding balance.

Hourly pay offers security and teamwork.
Commission drives performance and energy.
Hybrid provides both — when done compliantly.

Whichever path you choose, always ensure total pay meets award requirements, record everything transparently, and keep your team informed.

When your pay model aligns with the law and your values, you protect your people — and your reputation.

Commission vs Hourly Pay: Which Works Best for Your Team?

Understanding the Legal Framework