Commissions
HR in NY
74 Posts
I have a question on commissions. I don't really understand the formula that we use. It was developed by a Sales Manager about 10 years ago and only about 20% of our Sales force is still on this formula. The rest are on straight salary. Anyway, my question is can we deduct bad debt reserve from their monthly commission check? At the end of the fiscal year if there is no outstanding delinquent debt on any of their accounts we pay it back. If there is outstanding debt we do not pay it back. Is this legal? We have a very unhappy Sales Rep who has threatened to go to the labor board. Should we get an attorney? Thanks as always for your help.
Comments
From the Sales Reps side, it could be looked at as a disincentive, but depending on the type of product sold, and the mechanism in place for approval of sales, the Company is trying to protect themselves from sales transactions that are 'bad' transactions. Some products can be sold to customers that are not in a real position to complete the transaction. I can think of low or nothing down transactions with highly leveraged individuals or companies. The company is at risk for the entire length of time and just wants to share the risk with the Sales Rep.
I worked in one business that assessed several 'risk factors' associated with a customer (essentially credit scores and down payment amounts). Three levels were used. An "A" sale received immediate full commission. A "B" sale received 1/2 commission immediately with the second half deferred until the customer had made several payments. A "C" sale had the entire commission deferred for one year.
This business involved some high commissions and high sales volume. It shared the collection risk with the Sales Rep. Plenty of spiffs, like bonuses for all cash deals, volume kickers, etc.
I explained all of this because the business can have characteristics that make it reasonable to share this risk. It may not be like selling widgets to long established clients and customers.
Hope this helps.