Commission clawback
Discussion
Asking for a friend who’s looking for some guidance and experience around commission clawback. Let’s assume:
A sales rep earned a £100k commission
The sales rep gets paid £50k the following month
Another month later the business debooks the deal claiming that the deal was not new business.. it was expected revenue.
The rep now has a £100k quota deficit against their name
The rep decides to resign
The business asks the rep to repay £90k (essentially the deal value minus some smaller commissions that have been withheld)
Questions:
Can the business legitimately claim the pre-tax value?
Can they expect the rep to be saddled with the tax and NI liability?
In the event of an impasse, can the business turn the claim into a simple debt and therefore pursue via debt recovery?
If not, would they need to prove the claim dispute before any debt recovery could move forward?
I can add (hypothetical) colour if necessary…
A sales rep earned a £100k commission
The sales rep gets paid £50k the following month
Another month later the business debooks the deal claiming that the deal was not new business.. it was expected revenue.
The rep now has a £100k quota deficit against their name
The rep decides to resign
The business asks the rep to repay £90k (essentially the deal value minus some smaller commissions that have been withheld)
Questions:
Can the business legitimately claim the pre-tax value?
Can they expect the rep to be saddled with the tax and NI liability?
In the event of an impasse, can the business turn the claim into a simple debt and therefore pursue via debt recovery?
If not, would they need to prove the claim dispute before any debt recovery could move forward?
I can add (hypothetical) colour if necessary…
Janosh said:
Can the business legitimately claim the pre-tax value?
hmm...not really unless it goes into the next tax year. If he repays what is effectively an overpayment in the same tax year that it happens the Employer should be able to recover the Tax/NI from HMRC. If it goes into the following tax year then (from memory) the Employee has to repay the gross amount and then reclaim the tax back from HMRC himself.Janosh said:
Can they expect the rep to be saddled with the tax and NI liability?
As above the shouldn't if the recovery happens in the same tax year because they can recover the difference from HMRC.Janosh said:
In the event of an impasse, can the business turn the claim into a simple debt and therefore pursue via debt recovery?
Yes, that's the normal course of events. Take the employee to County Court, get a CCJ and then go through debt recovery. Tbh I've never had to do it for large amounts and the thought of a CCJ for a relatively small amount usually encourages people to make repayment.Janosh said:
If not, would they need to prove the claim dispute before any debt recovery could move forward?
Yes. You can't for example instruct bailiffs or apply for an AOE until you've gone through the CCJ process.2 GKC said:
Why would the rep be saddled with the tax liability. If the income is repaid the tax is no longer due.
If it crosses tax years the Employer cannot recover the tax/NI in relation to the overpayment (not without re-opening the prior year payroll, making the amendment, and resubmitting an EPS).thecopster said:
Needs to read the T&C’s of the comp plan carefully and take appropriate advice.
Did the deal go through all governance gates pre approval as surely that would ID whether it was new business etc
My thoughts too.Did the deal go through all governance gates pre approval as surely that would ID whether it was new business etc
Although if you’re in a position to be earning £100k commission on a single deal, I would have thought you’re the kind of person who knows exactly how the comp plan works.
MrBarry123 said:
thecopster said:
Needs to read the T&C’s of the comp plan carefully and take appropriate advice.
Did the deal go through all governance gates pre approval as surely that would ID whether it was new business etc
My thoughts too.Did the deal go through all governance gates pre approval as surely that would ID whether it was new business etc
Although if you’re in a position to be earning £100k commission on a single deal, I would have thought you’re the kind of person who knows exactly how the comp plan works.
He's a rep, not a lawyer.
I've never bothered reading all the terms of my complan ( all 17 pages), I don't need to.
Having just scanned them all though, mine makes no mention of Gross repayment, but lots of references to local law.
thecopster said:
Why would you need to…. To avoid situations like this!?
Know your comp plan inside out and use it to your advantage :-)
How would knowing his complan work to his advantage in this situation. Know your comp plan inside out and use it to your advantage :-)
Every complan I’ve ever had has had a windfall clause, “ we reserve the right not to pay blah blah blah”.
Every one has the clawback listed, but I’ve flicked through a few I’ve got saved and none mention the mechanics of gross vs net pay.
deja.vu said:
Why would you assume that?
He's a rep, not a lawyer.
I've never bothered reading all the terms of my complan ( all 17 pages), I don't need to.
Having just scanned them all though, mine makes no mention of Gross repayment, but lots of references to local law.
Because if you’re a rep in a position and with the capability to earn £100k commission on a single deal, you should be pretty switched on to things like that.He's a rep, not a lawyer.
I've never bothered reading all the terms of my complan ( all 17 pages), I don't need to.
Having just scanned them all though, mine makes no mention of Gross repayment, but lots of references to local law.
And you’d certainly know whether a deal was actually new business or not.
Edited by MrBarry123 on Thursday 16th February 23:11
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