“Can my employer change our commission plan any time it wants to?”

Question: I enjoy reading your blog and find it very helpful. I work for a company as an Inside Sales/Application engineer. Compensation is a salary plus commissions.

Commissions are earned upon meeting a specified amount of dollar booking for the quarter. Commissions are then paid out in month 4 upon receipt of receivables.

Recently the CEO announced that the company would not pay out commissions due if the prior month’s booking did not meet a specified target she would set. This was never part of the original compensation plan. Nor is there anything in writing from the company stating this change.

Can they do this? What can I do to ensure I’m paid what is due?

         New Brunswick, New Jersey

Answer: Dear Frank, I’m glad you enjoy reading our blog. It’s what makes writing it so much fun. Here’s my responses to your questions:

a. Generally, employers and employees can say to the other, “I’d like to change the rules”: Unless you and the company have an agreement (written or oral) that says, in effect, “The company cannot change its commission plan unless it gives a certain amount of prior notice, say, six months, then the company cannot always change its commission plan whenever it wants to. Bear in mind, Frank, that you can also say to your employer, “Starting next month, unless I get a 2% increase in my commission rate, I am taking a different job.” It’s a two-way street. And by “rules” I mean any term of the employment relation, from your title to your hours, from your compensation to your territory.

b. However, neither employer nor employees can “change the rules” retroactively: A change in the commission plan can be prospective, only, not retroactive. Said differently, an employer can change the way commissions are earned and paid in the future, not in the past. So, if you earned a certain commission in prior quarters, you must be paid those commissions according to the former commission plan. But going forward, any commissions earned must be earned in accordance with the new commission plan.

If you would like to obtain a Model Letter for Requesting Commissions Earned But Not Paid due to Retroactive Commissions Plan Change, that you can adapt to your own facts and circumstances, that shows you “What to Say, and How to Say It™” just [click here.] Delivered by Email – Instantly!

c. Some prior notice of “Rule Change” is necessary, but it does not have to be in writing: There does not need to be anything in writing to change a commission plan. The essential thing is that the employees got notice of it in some way. Apparently you heard about the change in commission plan from  the CEO, or an announcement by her, or from others. So long as you learned of it, you have a choice to either (i) accept it, (ii) seek to change it through some sort of negotiation, or (iii) find a job with a different employer where the commission plan is more to your liking.

d. There are two basic ways to ensure you get paid all you deserve: First, you should keep careful track of each sale, each commission paid, and each payment received, in order to do your own calculations of commissions earned and due. The second way is more fundamental: make sure you are the most successful salesperson in the company, close to clients, and able to “walk” if you don’t get what you want. With that status, most companies would do all they can do – and sometimes even more than that (ha ha) – to get you to stay. I have many times been able to negotiate higher compensation for my clients than was “permitted,” “allowed,” or “ever been paid,” where the client had the relations, the skills, and the history of success, because they had demonstrated their unique and special value. The opportunity to do that is available to everyone.

Commissions, wages or other monies owed to you by former employer? Your best bet is to make a written request. We offer a Model Letter to show you “What to Say, and How to Say It.”™ To obtain your copy, just [click here.] Delivered by Email – Instantly!

Hope this is the information you needed. My best to you.

Best, Al Sklover

P.S.: One of our most popular “Ultimate Packages” of forms, letters and checklists is entitled “Ultimate Resignation Package” consisting of two Model Resignation Letters, a Model Involuntary Resignation Letter, a Memo to HR Pre-Exit Interview, and our 100-Point Pre-Resignation Checklist. To obtain a complete set, just [click here.] 

© 2010 Alan L. Sklover, All Rights Reserved.