10:30 am, April 11, 2020
Confusion surrounding how sales staff should be paid for the time they worked in March and the commissions due could land dealership bosses in serious trouble with HMRC.
Car Dealer has been made aware of a number of dealerships that are refusing to pay sales staff properly for the weeks they worked in March – and the commissions owed to them for the sales they made.
Some sales staff are being told that they will only get furlough payments up to the government’s set £2,500 limit, despite the fact they worked as normal for a proportion of the month.
One salesman who contacted Car Dealer Magazine, and wanted to remain anonymous, said: ‘We worked up until the shutdown in March and delivered as many cars as we could, but we are being told we are being paid 80 per cent furlough for our April pay packets, which should include the money for the time we worked in March and the commissions due.
‘I believe that furlough pay should reflect the time you have worked and not be backdated to March 1.’
And he would be absolutely correct.
Dealerships that assume the rules run this way could fall seriously foul of HMRC as they would effectively be making staff work while under furlough – something that will come with heavy penalties and fines if HMRC finds out.
The government guidelines are clear and state that an employee should not work or generate any revenue for the company while on furlough leave.
Kiril Moskovchuk, from Lawgistics, said: ‘If the furlough was backdated and covers the time they were working, this is seriously wrong. It will put the full furlough grant in jeopardy plus a claim for unlawful deduction from the staff.
‘HMRC will have a line in place to report instances when furloughed employees are/were working when on furlough. If the staff is put on furlough, not working and is not paid pending receipt of the grant, then the position is different.’
Mike Jones, chairman of motor trade accountancy firm ASE Global, added: ‘As with all staff, sales staff should be paid as normal up until the point of furlough. I’m sure that HMRC will be checking in the future that businesses were not effectively backdating the start of people’s furlough periods and looking at both the dates of communication and for evidence that people were working during their deemed furlough.
‘This will include their commission payments for vehicle and add-on product sales, albeit this will naturally be really tricky for companies who had a monthly volume target, potentially with different bandings, as part of the pay plan.
‘Many businesses I have spoken to have adopted the pragmatic and positive approach of pro-rating the targets and, if the sales person was on track to hit a certain target as we went into lockdown, then they are paid at that banding.’
By asking employees to work during March and then attempting to backdate their furlough payment is strictly against the rules.
The backdating was only put in place to account for employees who were made redundant before the crisis and who have been taken back to be placed on furlough.
Sales staff who worked in March should be paid in full for the weeks they worked – and paid commissions in full, too. Furlough payments should only account for the days they were on furlough leave.
For example, if a sales person worked for three weeks in March and earned commission and was then placed on furlough for one week, they should be paid three weeks as normal and one week at 80 per cent, including any commissions they would usually earn. You can work out the latter amount by averaging the last year’s wages, then making a pro rata payment for the one week, or take the equivalent month from last year (whichever is higher) and again make a pro rata payment for the week.
So they get three weeks as normal – as they were working as normal – and one week on furlough.
Lawgistics warned dealership bosses in a Car Dealer Live interview this week – which you can watch in full below – that there were likely to be employment tribunals following this period for staff who were not paid properly under the scheme.
David Kendrick, a partner at UHY Hacker Young, added: ‘Undoubtedly, this will get looked into by HMRC down the line. Businesses should seek written employment advice from their lawyers on this to ensure they are covered and calculating payments correctly. The last thing people need is to get this wrong now and fall foul of the rules once normality returns.’
More: HMRC confirms compulsory commission can be included in sales staff’s wages
More: Government guidelines confirm commission can be paid to furloughed staff
Comment: Why dealers have a DUTY to pay commission to furloughed staff
More: All you need to know about furloughing staff
Watch accountants and legal experts discuss all you need to know about furlough payments and commissions in this week’s Car Dealer Live broadcast below
