Conner LantzKeymasterSeptember 19, 2023 at 6:18 amPost count: 4836
My company has given a contract to a small segment of employees over the last couple years that gave a yearly salary and commissions paid bi-weekly. Our corporate strategy has shifted which will increase the commission work by roughly double which is very different from what these contracts wer designed for. Our contract advises that we review commissions on a yearly basis so I’m thinking I can change the commission, but the salary I don’t think I can legally alter. Would this be correct thinking or is changing the commission structure something that I could face a legal consequence from?Conner LantzKeymasterOctober 4, 2023 at 1:33 amPost count: 4836
An employee is entitled to a clear understanding of the pay structure. Employers cannot unilaterally reduce an employee’s income by varying the commission entitlement without reasonable advance notice. Employment agreements should allow an employer to adjust commission structures to meet changing market conditions.
When it comes to altering employment contracts, especially in relation to compensation, there are several factors to consider to avoid constructive dismissal:
1. Review the Contract: You mentioned that your contract advises reviewing commissions on a yearly basis. It’s essential to carefully review the terms and conditions outlined in the employment contracts of the affected employees. These contracts may specify the terms under which commissions can be changed.
2. Legal Obligations: Changing the commission structure could potentially have legal consequences depending on various factors, including local labor laws, contract terms, and the nature of the changes. In some cases, commission structures may be considered part of the compensation package and could be subject to the same legal protections as base salaries.
3. Good Faith and Fair Dealing: In many jurisdictions, employers are required to act in good faith and deal fairly with their employees. Abrupt and substantial changes to commission structures that significantly reduce an employee’s overall compensation could be seen as acting in bad faith and may lead to legal disputes.
4. Communication: If you decide to make changes to the commission structure, it’s crucial to communicate these changes transparently and in advance to the affected employees. Offering an explanation for the changes and giving employees the opportunity to ask questions or seek clarification can help mitigate potential conflicts.
5. Consult Legal Counsel: Before making any changes, especially if they could significantly impact employees’ compensation, it’s advisable to consult with legal counsel who specializes in employment law. They can provide specific guidance based on your jurisdiction and the terms of your employment contracts.
6. Negotiation: Depending on the situation and the terms of the employment contracts, you may need to negotiate the changes with the affected employees or their representatives.
Ultimately, whether changing the commission structure could lead to legal consequences will depend on the specifics of your situation, including the terms of the employment contracts, local labor laws, and how the changes are implemented.
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