Are Commission payments recoverable under the Coronavirus Job Retention Scheme and Flexible Furlough Scheme?
As I am sure you will have noticed, either as an employer who wants to make sure they are acting within the guidance, or an employee making sure you are receiving your entitlement, the guidance is not as transparent as we’d all like and it is still very much a grey area when it comes to benefits, commission and overtime payments.
However, we understand that benefits, commission and overtime payments CAN be claimed where the entitlement to the same is CONTRACTUAL under the Coronavirus Job Retention Scheme. Further, the new scheme published on 12th June 2020, also introduced the New Flexible Furlough Scheme which takes effect from 1st July 2020. As we understand, the same applies to the new Flexible Furlough Scheme as well.
Let’s explain why.
Context of the confusion.
On the 25th March 2020, the Guidance on the Furlough Scheme was introduced via the Government website stating ‘fees, commission and bonus’ were not recoverable for employees placed upon Furlough leave. Fast-forward to 3rd April 2020, the Guidance on the Furlough Scheme is updated via the Government website then stating ‘you (employers) can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments.’
This would appear to suggest that benefits, commission and overtime payments COULD now be recovered provided the employer was obliged to pay them. Employment lawyers thought that was the end of the matter, and that the confusion and issues had been rectified.
However, to add further confusion, on 15th April 2020, the Direction for the scheme was published via the Treasury stating that the qualifying costs are restricted to ‘regular salary or wages.’ The Direction then goes onto say that ‘regular’ means salary or wages which are ‘not conditional upon any matter’ with relevant matters including ‘the performance by the employee of any duties of the employment’. The Direction, therefore, appears to suggest that benefits, commission and overtime payments COULD NOT be recovered as they are potentially conditional upon the performance of the employee.
There has been no formal clarification of these issues, and as you can see there is a contradiction in the publication in respect of this scheme. We have received a large number of enquiries on this point which evidence the difficulty the nation is having in regard to these payments.
The Guidance document was then updated again on 4th June 2020, after the Treasury’s Direction which details the following in respect of such payments:
“The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:
• regular wages you pay to employees
• non-discretionary payments for hours worked, including overtime
• non-discretionary fees
• non-discretionary commission payments
• piece-rate payments
You cannot include the following when calculating wages:
• payments made at the discretion of the employer or a client – where the employer or client was under no contractual obligation to pay, including:
• any tips, including those distributed through troncs
• discretionary bonuses
• discretionary commission payments
• non-cash payments
• non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay”
Therefore, the Guidance on the matter has not changed and appears to allow employers to recover contractual benefits. The new Guidance published on 12th June 2020 includes identical terminology, so it appears the obligation to claim contractual payments remains unchanged under the new scheme as well.
We are of the view that where employers have placed reliance on the Guidance, the Government would be estopped from trying to resile on such assurance, and the contractual commission should be claimed under the Scheme pursuant to the said guidance. Any failure to do so could result in employers facing liability for unlawful deduction from wages and/or a breach of the implied term of mutual trust and confidence.
The Government have now published further guidance on the payments for this on fixed and variable pay should be calculated which can be accessed here.
Important to note
To confuse matters further, even where a contract is silent on a commission this does not necessarily mean the benefit is not contractual. Entitlement to commission and other benefits can become CONTRACTUAL in an employment context irrespective of a written agreement through what is known as ‘custom and practice’. These particular types of claims are yet to be heard in the Tribunal given the infancy of the terms, but in respect of whether a term or benefits is deemed contractual through such means the test the Tribunal previously applied was whether the term was ‘reasonable, certain and notorious’.
In order for something to be deemed as a ‘custom and practice,’ it has to be a long-standing occurrence that is continuously applied, acknowledged and expected by all. The fact that a benefit has been paid by an employer for a number of years will not automatically mean it becomes a guaranteed entitlement. Ultimately, a Tribunal will consider whether the circumstances demonstrate that the parties intended the term to form part of their contract. The Tribunal will ask themselves did the parties have contractual intentions?
In other words, can they be taken to have recognised that the practice has attained contractual status?
The answer to this question will be dependent upon a number of factors. If you are unsure whether your employee’s commission is contractual, or you are an employee and would like to know whether the commission you receive is contractual, do not hesitate to contact our free coronavirus helpline on firstname.lastname@example.org
- The Guidance on making a claim can be found here
- Guidance on the payments for this on fixed and variable pay can be accessed here.
- The Treasury Direction can be found here
- Summary of changes to the Scheme can be found here