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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 49813
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We want to make one of our staff redundant. She is 45 years

Customer Question

We want to make one of our staff redundant. She is 45 years old and has worked with us for just over 3 years, She earns £45k per year and is on a one month notice period.

I understand how to work out the statutory redundancy payment etc, but she has raise the question of a bonus.

In her offer letter, it states "PERFORMANCE COMMISSION - the company will extend to you a performance related commission plan totalling up to £27,000 during a 12 month period on achieving mutually agreed performance targets"

This commission is not mentioned in her contract of employment.

After 6 months employment she asked for a review and we talked about the performance commission, and it was agreed that a paper would be put to the board outlining a company commission structure. The board discussed this and agreed that no scheme could be put in place until the company financial performance was improved.

The company has not made a profit in the last 3 years, no targets have been agreed and no-one entitled to the scheme has received any payment.

A part of her severance package she is asking for the company to make a payment towards this commission. The company is very strapped for cash at the moment (why we are making her redundant) and cannot make any such payment, nor do we want to.

What is our legal postion on this?
Submitted: 4 years ago.
Category: Law
Expert:  Ben Jones replied 4 years ago.

Ben Jones :

Hello, my name is Ben and it is my pleasure to assist you with your question today. Has she previously been paid this commission and if so how was that calculated and what was it dependent on?

Ben Jones :

PS: As I am just about to go offline I will provide my full advice in the morning, thanks in advance for your patience.

JACUSTOMER-cgw75olt- :

She has never been paid any commission and at no time have any terms for the payment of the commission been paid

JACUSTOMER-cgw75olt- :

sorry, meant to say "at no time have terms for the payment of the commission been made"

Ben Jones :

Thank you for your patience. Whilst the offer letter states that a commission plan will be agreed, this was never done and there is nothing to suggest that the employee was promised such commission would be paid at any time, at least not before the company's financial situation improved.

There are no written terms to suggest such a plan was put in place, there have been no previous payments made so she cannot claim custom and practice and no one else has been paid this in the past. So the evidence to make her entitled to any payment under it is minimal. From a legal point of view you would not be required to make any payment in relation to this.

However, if she is unhappy with this, it could prompt her to challenge the dismissal in the employment tribunal in order to try and seek compensation. Even if you followed the correct procedure for the redundancy, she cannot be stopped from challenging it and seeking the tribunal's opinion on whether it was fair. This creates a nuisance for you as you would then have a tribunal claim to try and defend and it will take up extra time and resources.

The only way to prevent such a claim from being made is to try and enter into a compromise agreement with the employee. This is basically an agreement where you pay them off to leave and in return they make a formal promise not to make any claims against you in the future. However, you would need to pay a few hundred pounds for a solicitor to advise her on the terms of the agreement and would also be expected to 'sweeten' the deal by paying her extra compensation for her to agree to this. In this case it would be the commission, or at least part of it. Whilst you would be making part of a payment you would not want to, it will bring you peace of mind that this is a clean break and that no further action can result against the company as a result of this.

The alternative is to refuse to pay the commission, proceed with the redundancy as originally planned but with the risk of her challenging this in the employment tribunal.

I would be grateful if you could please take a second to leave a positive rating - your question will not close and I can continue providing further advice if necessary. Thank you