Commission Schemes - Employment Appeal Tribunal Provides Clarity

The case of Raymond Saul & Co LLP v Mr Rashbrook is a reminder of the importance of having well drafted commission and bonus clauses, as well as having clear rules on apportioning team effort.

Background

This was an appeal by a firm of solicitors in respect of a ruling that it should pay a bonus to a newly qualified solicitor. Mr Rashbrook’s contract provided that he would receive 20% of profit costs invoiced by him if these were at least three times his annual salary.
 

EAT’s decision

On appeal the EAT held that:-

• Contract clauses should be construed neutrally and given their natural and ordinary meaning.
   

• The relevant clause in this case stated that commission was due only for “work carried out by the Employee” (i.e. only for work done by Mr Rashbrook himself).
   

• After the work carried out by his colleagues had been disregarded, Mr Rashbrook hadn’t met the required threshold of three times his salary.  

Takeaways for employers

Where commission or other bonus/incentive schemes are in place, clear drafting and comprehensive record keeping measures are essential, particularly in respect of team based contributions. In addition, and to avoid misunderstandings and/or potential disputes, employers should ensure employees are clear as to how such schemes work and are updated as necessary.

If you would like to discuss how this ruling could impact your organisation, please contact our team  on 01342 347063 or email us via hello@starfordlegalhr.com