In this case study, employment lawyer Kevin Murphy looks at a client case where an estate agent was questioned about their commission scheme by an employee who was leaving
Overview and Background
The client is a large estate agent who operates a commission scheme for their sales staff. They have never written the commission scheme down to allow them to change it should they ever need to. An employee handed in their notice and left their employment. Upon receiving their commission payment the employee asked why those houses that were sold during the notice period were not included.
Client concerns and aims
As standard practice, the client would not commission on sales secured throughout the notice period.
The client was concerned about the threat of legal proceedings and that the scheme may be too vague, they still wanted the flexibility to alter the commission should they need to.
They have had numerous challenges to a decision relating to the commission scheme but the ex-employee was the first to threaten litigation.
What we did
We worked with the employee to understand the custom and practice within the business, providing evidence that the commission had never been paid during the notice period. The employer did not want to part negatively so offered a goodwill payment, the employee accepted it and we got both parties to sign a legally binding agreement meaning no further claims could be brought.
We then explained to the client the benefit of having a written agreement and that by having a commission scheme, not a contractual clause, we would still secure them so degree of flexibility. We drafted a comprehensive commission scheme detailing how much commission is payable, when commission is payable and when it may not be payable. The commission scheme reflected how the business operated and was issued to relevant staff who all agreed with the scheme.
Outcome and benefits
The ex-employee understood the position of the business and was happy, leaving a great glass door review. He was also prohibited from bringing commission scheme base claims in the Tribunal.
The business provided certainty to their team over the commission, and obtained the same level of flexibility but reduced the number of queries and complaints in relation to commission calculations.
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