Provision (Commission Pay)
Provision is variable pay earned when an employee reaches defined sales or performance targets—common for sales roles, consultants, and agents. It supplements or replaces base salary. Swiss employers must document the calculation formula, performance conditions, and payment terms clearly in the employment contract or company rules (Reglement).
Provision refers to a commission or performance-based payment an employee earns when achieving specific measurable results, usually sales targets or client acquisitions. It is distinct from salary and typically calculated as a percentage of revenue generated, deal value, or a fixed amount per completed transaction.
Provision is widespread in Swiss sales departments, insurance broking, real estate, and client-facing consulting roles. Payment may occur monthly, quarterly, or at project completion depending on your business model and contract terms.
When Provision Arises
Provision becomes relevant whenever you hire someone for a role where output—not just hours worked—drives compensation. This includes sales staff earning a percentage of closed deals, agents on commission per contract signed, or consultants paid per project milestone.
It also applies if you offer discretionary bonuses tied to explicit targets (e.g., 'CHF 500 per new corporate client'). The clearer your performance criteria, the fewer disputes arise later.
- Sales positions with percentage-of-revenue models
- Brokerage and agency roles (real estate, insurance, staffing)
- Project-based or milestone-driven compensation
- Hybrid contracts combining base salary + commission
- Recruitment and business development roles
- Technical or management roles with performance bonuses
Your Obligations as Employer
Swiss law (particularly the OR, Code of Obligations) requires that commission terms be documented in writing—either in the employment contract or in a binding company rules document (Reglement) accessible to all staff. Vague promises of 'good performance pays well' are not enforceable.
You must specify the calculation method, performance metric (revenue, number of contracts, margin %), payment frequency, and conditions under which commission is forfeited (e.g., if the employee resigns before a deal closes). Ensure the formula is mathematically verifiable so the employee can audit their own payment.
- Define commission formula in writing before the role begins
- Specify what counts as 'achieved target' (revenue, units, deals)
- State whether commission is earned on signature, delivery, or payment received
- Clarify forfeiture rules (e.g., client cancels, employee leaves mid-contract)
- Document payment frequency and method (monthly, quarterly, annual)
- Keep records of all commissions paid, by employee and period
The Most Common Mistake
The single largest error is leaving commission terms oral or ambiguous. An employer says 'You'll earn 5% of deals you close' but never specifies: 5% of what (gross revenue? margin? invoice value?)? Paid when (contract signed? cash received? after 30 days?)? What if the customer cancels?
Without written detail, Swiss courts typically interpret ambiguity against the employer and in favor of the employee. If disputed, you may owe commission you thought was conditional. Document everything now to avoid costly litigation and maintain employee trust.
- Assuming verbal agreement is binding—it is not enforceable without proof
- Failing to specify the exact calculation (% of revenue? fixed amount per deal?)
- Not addressing what happens if a sale falls through or customer cancels
- Changing commission terms mid-year without written notice and consent
- Commingling commission with salary, making it unclear what is variable
- Withholding commission to 'incentivize' performance or punish departures
Frequently asked questions
- Must I pay provision if the customer cancels after the employee leaves?
- This depends entirely on your written contract terms. If you stated 'commission earned at contract signature,' you likely owe it. If you said 'earned only if customer pays in full,' you may not. Swiss law does not presume a default rule; the written terms govern. Consult a lawyer for your specific language.
- Can I deduct provision from salary or withhold it as a penalty?
- No. Commission, once earned under your stated criteria, is wages and protected by Swiss labor law. Deduction or withholding as punishment violates the OR. You may refuse to pay if the condition (e.g., revenue target) was not met, but you cannot retroactively change terms or use commission as a disciplinary tool.
- Do I owe provision if the employee is dismissed?
- Again, your written terms decide. If dismissal is for cause and your contract states 'provision forfeited upon termination for cause,' you may not owe it. If the employee is dismissed without cause, most Swiss courts hold that earned provision remains due. Have clear language and seek legal counsel before dismissal.
General information for Swiss employers, not legal advice. Have a lawyer confirm anything with legal consequences.