Firm Can Change Commission Payments
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Q Our company has been paying commissions to our sales personnel based on invoiced sales rather than payments received. We would like to switch to the latter.
Can a company simply establish a policy that commissions are paid when payment is received from our customers?
--D.C., Marina del Rey
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A Absolutely. You can provide that commissions will not be deemed earned until payment is received from the customer.
Many employers have such a policy to avoid paying commissions on revenue that is never received. The only limitation is that you cannot change a commission plan with respect to sales already made; you can apply the new policy only to future sales.
You must also notify all employees about the policy in writing.
--James J. McDonald Jr.
Attorney, Fisher & Phillips LLP
Labor law instructor, UC Irvine
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