Paying sales commissions in Uganda: PAYE, NSSF and the contract
Commission is employment income for PAYE and part of gross wage for NSSF. How to write the scheme into the contract and show it on the payslip.
Commission is how shops, distributors, car dealers, estate agents and salons motivate the people who sell. It is also the pay element most often handled outside the payroll, in cash, "to keep it simple". That simplicity is expensive: commission is taxable employment income, it is part of the gross wage on which NSSF is due, and a scheme that is not written down is a dispute waiting for a labour officer. Here is how to run it properly.
Commission is employment income
The Uganda Revenue Authority's sector guides define employment income as gross cash received by an employee in the form of salary, leave pay, payment in lieu of leave, overtime, fees, commission, gratuity, bonus and allowances of every kind. There is no separate, lighter regime for commission paid to an employee. It is added to the month's other earnings and PAYE is computed on the total under the resident bands URA publishes, which from 1 July 2026 begin at a tax-free UGX 335,000 a month.
This has a practical consequence for variable earners. A salesperson on a basic of UGX 300,000 pays no PAYE in a slow month. In a month where commission adds UGX 400,000, the gross is UGX 700,000 and PAYE is UGX 33,750 plus 30% of the UGX 215,000 above 485,000, which is UGX 98,250. The deduction swings with the sales, and the payslip must show why.
Commission earned by someone who is not your employee, such as an independent agent, is a different matter and is their own income to declare; the employer's PAYE duty attaches to employees.
NSSF is computed on gross wage
The National Social Security Fund's membership page says the employer deducts 5% from the employee's total gross monthly wage and adds 10% of the same gross. Commission paid through payroll is part of that gross. An employer who pays basic through payroll and commission in cash is under-remitting NSSF every month the salesperson earns anything, and the shortfall attracts interest until it is paid.
Write the scheme into the contract
Section 59 of the Employment Act requires the written particulars given to every employee to state the wages or the means by which they can be calculated and the intervals at which they are paid. A commission scheme is exactly such a means of calculation, so it belongs in the particulars or in a scheme document the particulars refer to. A workable scheme document states:
- the base: gross sales, net sales after returns, or collected cash;
- the rate or rates, and any threshold or tiers;
- the period over which sales are measured and the month in which commission is paid;
- how returns, discounts and unpaid invoices are treated;
- what happens to commission earned but not yet paid when the employee leaves.
The Employment (Amendment) Act assented to on 29 April 2026 formally recognises piecework, where pay is by output rather than time. A pure commission arrangement is close to that model and will sit more comfortably within the Act once the amendment commences, but the written particulars requirement still applies.
Show it on the payslip
Section 50 requires an itemised pay statement with every payment, setting out each deduction and its purpose and the net wages. For a commission earner that means a gross made up of basic and commission as separate lines, the PAYE and NSSF computed on the total, and the net. A salesperson who can see the sales figure the commission was based on will query it far less often than one handed a lump sum.
Common mistakes
- Paying commission in cash outside payroll, which understates PAYE and NSSF and leaves no record for the employee.
- Changing the rate or the base verbally in a bad month. Section 59 requires written notice of any agreed change.
- Clawing back commission on returned goods without a written rule. Section 46 permits only specific deductions, and a clawback that was never agreed is not among them.
- Forgetting that commission raises the local service tax band in the July to October months, since LST is assessed on take-home pay.
Why the discipline pays
A properly recorded commission scheme is more than compliance. It tells you which products and which staff earn their keep, it lets a new salesperson see exactly what the job can pay, and it gives you a clean answer when URA or NSSF ask how the month's gross was built. Sales people respond to clarity; the law happens to demand the same thing.
Sources
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