Commission called discretionary bonus

andreafundraiser

I get paid commission weekly in my sales job. Unfortunately my contract calls it ‘discretionary bonus’ so it’s not included in the furlough scheme payments. 

I believe this wording is common in sales jobs. It’s losing me a lot of money. Please help. 

Galloglass

How is the commission earned? Is it paid whether or not the company is open?

For example, some commissions are based on an ongoing contract and commission continues for as long as the contract exists. Other commissions are based on sales made in a period. Which is closer to what you do?

andreafundraiser

Thank you for helping. It’s the latter, we are set a weekly target. There are 4 rates of ‘commission’...the more we sell the more we get per sale. We are paid weekly (2 weeks in arrears). I’ve done the job for 18 months, many colleagues a lot longer, and it’s never been our experience not to get what we were due. 

We are all furloughed so are just receiving 80% of our small basic wage.

Jeremy535897

See guidance

What to include when calculating wages

The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:

• regular wages you pay to employees
• non-discretionary overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments

You cannot include the following when calculating wages:

• payments made at the discretion of the employer or a client - where the employer or client was under no contractual obligation to pay, including:
  • any tips, including those distributed through troncs
  • discretionary bonuses
  • discretionary commission payments
• non-cash payments
• non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay

Some people disagree, but I believe that commission that your employer has to pay under your terms of employment is non-discretionary. Discretionary commission would be, for example, the employer saying to the sales staff, "you have done so well this month that, out of the kindness of my heart, I'm giving you an extra 1% commission."

andreafundraiser

Jeremy535897 said:

See guidance

What to include when calculating wages

The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:

• regular wages you pay to employees
• non-discretionary overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments

You cannot include the following when calculating wages:

• payments made at the discretion of the employer or a client - where the employer or client was under no contractual obligation to pay, including:
  • any tips, including those distributed through troncs
  • discretionary bonuses
  • discretionary commission payments
• non-cash payments
• non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay

Some people disagree, but I believe that commission that your employer has to pay under your terms of employment is non-discretionary. Discretionary commission would be, for example, the employer saying to the sales staff, "you have done so well this month that, out of the kindness of my heart, I'm giving you an extra 1% commission."

Thanks Jeremy, I agree with you Jeremy. My contract legally says ‘discretionary bonus’...but in practice it is a commission structure. It clearly states that if a certain number of sales are made a certain amount will be paid...but because they’ve called it discretionary it’s a technicality loophole for the furlough scheme.

Undervalued

andreafundraiser said:

Jeremy535897 said:

See guidance

What to include when calculating wages

The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:

• regular wages you pay to employees
• non-discretionary overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments

You cannot include the following when calculating wages:

• payments made at the discretion of the employer or a client - where the employer or client was under no contractual obligation to pay, including:
  • any tips, including those distributed through troncs
  • discretionary bonuses
  • discretionary commission payments
• non-cash payments
• non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay

Some people disagree, but I believe that commission that your employer has to pay under your terms of employment is non-discretionary. Discretionary commission would be, for example, the employer saying to the sales staff, "you have done so well this month that, out of the kindness of my heart, I'm giving you an extra 1% commission."

Thanks Jeremy, I agree with you Jeremy. My contract legally says ‘discretionary bonus’...but in practice it is a commission structure. It clearly states that if a certain number of sales are made a certain amount will be paid...but because they’ve called it discretionary it’s a technicality loophole for the furlough scheme.

Employers love to slip the word "discretionary" in wherever they can and generally it is perfectly lawful providing the discretion used is not so far off  the mark as to be considered perverse.

Presumably the discretion not to pay your bonus / commission, despite the structure, might be used if a client contacted the firm and said "we only ordered this stuff from you because we were desperate but we are not willing to deal with this salesperson again" or something like that? If that happened it would almost certainly be lawful not to pay the bonus / commission, whereas it wouldn't have been without the discretionary clause.

So, whilst the current situation is an unexpected consequence, the problem is you did agree to it!

Galloglass

I'm on the edge of some of these discussions about what is included in calculations. It's not my field of experience.

The HMRC advise employees to ask their employer to contact HMRC for guidance. They admit that some of their guidance may not have been clear.  If a request goes in, a "technician" at HMRC can explain their interpretation of the rules to the employer over webchat. So far so good.

From experience, if HMRC technicians get it wrong then HMRC will try to claim is back based on the simple logic that if it wasn't legal then it is repayable. So there may be a downside later.

However it would do not harm to ask your employer to seek clarification from HMRC technicians on that specific issue.