Commissions

In some jobs, especially ones that involve sales, a significant portion of your total compensation package may be comprised of commissions.

Generally, commissions are payments that are based on your own sales or productivity, although for some sales managers or other executives they also can be based on the sales or productivity of the employees who report to you. Our lawyers experienced at handling cases involving commission disputes.

Commissions typically are calculated using a formula. While the formula can be a simple as a percentage of your total sales, some commission plans can be complicated and confusing. They can factor in profit margins, costs of goods, sales volumes, and a variety of other factors. In fact, some commission plans seem to arbitrarily set different formulas for different sales.

Whatever formula your employer uses, it is important that you understand how your commissions are supposed to be calculated so you can confirm that you are being paid properly.

There are many possible times at which an employee can earn their commissions. For example, in some jobs commissions are earned when the sale is booked or when the sale is closed. In others, the commission is not considered earned until the customer actually pays for the good or service it is purchasing.

The timing of payment of commissions to employees also can vary greatly. For instance, companies might calculate and pay commissions monthly, quarterly, or annually. Obviously, this can have a substantial impact on your cash flow, especially if your base salary or draw is relatively low.

Another important factor is how long you will continue to receive commissions for a particular customer or a particular sale. For example, if you bring in a new customer, depending on your agreement, you might receive commissions only on additional the sales that you personally make to the customer, or you could receive commissions on all of the business that comes in from that customer. Likewise, you may or may not be entitled to commissions if the customer renews the order or subscription you initially sold to it.

You should know if and when you are entitled to receive commissions from sales to your customers, including if and when you would be entitled to continue to receive commissions from a customer after you leave your job.

Many commissioned employees receive a draw against their commissions. While these payments often look like a salary, they really are an advance toward future commissions the company hopes you will earn. Unless a draw is guaranteed, if your actually commissions are less than your draw, then it might be possible that your employer could withhold future commissions, or even ask you to pay back some of the money you already have received.

Commissions owed to employees are covered by the New Jersey Wage Payment Law ("NJWPL").  Under the NJWPL, it often is possible to recover not only your unpaid commissions, but also liquidated damages equal to up to two times your unpaid commissions, plus attorney's fees.

If you have a dispute relating to your commissions, one of our New Jersey commission dispute lawyers can help you. For example, we can assist if your employer is not calculating your commissions correctly, or is refusing to pay the commissions you have earned when they are due. Our telephone number is (201) 777-2250.

If you were an independent sales representative, rather than an employee, New Jersey has a very strong law to ensure that you are paid all of your commissions at the end of your contract. That law, the New Jersey Sales Representatives Rights Act ("NJSRRA"), requires that, after your contact with the company ends, if the company you worked for pays your commissions more than 30 days late then it must pay you the commissions it owes, plus three times those unpaid commissions and your attorney's fees. To read more about the NJSRRA, please see our article: Independent Sales Representatives May be Entitled to Quadruple Damages.

New Jersey commission lawyers in our business and entrepreneurial practice are experienced at reviewing employment contracts that include commissions, including executive compensation agreements. We can help you understand your employer’s commission plan and suggest ways to clarify or improve how your commissions are calculated and paid. Similarly, we can draft a commission agreement to help protect your rights and interests.

Employers generally cannot change their commission plans after-the-fact. Rather, they are required to notify their employees in advance of any change to the applicable commission formula.

If you have a question or concern about your commissions, or would like to schedule a consultation with one of our lawyers experienced at handling cases involving commissions, please feel free to either contact us online or call us at (201) 777-2250.