- Commission should have been included in all sales staff’s furlough pay all along
- Government considering to ask employers to pay 25 per cent of furloughed staff’s money
An official update to the furlough scheme has clarified what commission can be included when car dealers work out salespeople’s pay – and dealer groups who refused to include it were WRONG.
Confusion has surrounded the fact the government stated ‘discretionary commission’ should be excluded when working out furlough payments – but now official guidance by the Treasury has confirmed it should have been included in calculations.
And dealer groups who have now wrongly paid their staff are being advised to contact HMRC and see if they can claim the money they failed to pay retrospectively.
Lawgistics director Joel Combes said: ‘In short, some employers interpreted that if “discretionary” was referred to in an employees contract they could NOT include commission in furlough payments. We said these were just badly written contracts and if commission was paid monthly as part of a salary, it should be included in the calculations. This confirms we were right.’
Many car dealer groups refused to include commission when working out furlough payments to staff – despite being advised to include it by most experts.
Some dealer groups refused to include commission because they believed salespeople’s contracts stated that commission was at the discretion of their manager and thus should have been excluded from calculations.
But, as many suspected all along, this turns out to be wrong.
Lawgistics and many accountants argued since the beginning of the scheme that car sales commission should have been included when working out payments.
Despite this, many salespeople contacted Car Dealer to say the groups they worked for had refused to include commission in their furlough payments and pay them properly.
Lawgistics solicitor Nona Bowkis explains: ‘We have long advised that commission that is regularly paid to employees each month should be paid to furloughed employees under the “employees whose pay varies” calculation regardless of any mention of the word “discretionary” in the contract.
‘For the avoidance of doubt, we now see at 7.19 [official Treasury document] the words: “whether or not that method involves the exercise of discretion by the employer or a person connected with the employer” in regard to the payment of commission.’
Bowkis adds that this is supplemented by new wording in the guidance which states:
- When variable payments are specified in a contract and those payments are always made, then those payments may become non-discretionary. If that is the case, they should be included when calculating 80% of your employees’ wages
The Treasury document can be found here.
Meanwhile, the chancellor is reported to be considering asking employers to pay a quarter of staff’s wages when the furlough scheme’s full support from the government ends in July.
From August, it is believed Rishi Sunak is planning to ask employers to contribute as the lockdown begins to ease, reports The Times.
The paper says the chancellor will allow employees back part time for as many hours a week as they want – but all employers will be expected to make the payments even if their businesses are still locked down.
Companies will also have to start paying national insurance again but the government will continue to cover pension contributions.
The Treasury is said to be considering plans for employers to cover between 20- and 30 per cent of their staffs wages under the furlough scheme. Sunak is expected to announce his plans next week.
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