If you are stuck in such a situation, here is what to do.

Mr. Alex Sharma was employed in the technology sales department of a company named “Quantum Digital Solutions” in Manchester. His remuneration package consisted of a basic salary and an On-Target Earnings (OTE) commission, which was paid quarterly. He joined the company in September 2023 on a 12-month Fixed-Term Contract (FTC) as maternity cover. Alex received his commission payments as scheduled in December 2023, March 2024, and June 2024.

In July 2024, impressed with his performance, the management offered him a permanent position to commence after his FTC expired. The proposed process involved the company sending him two formal communications: one confirming the non-renewal of his FTC, with his last day being 31st August, and a second offering a new permanent contract starting on 1st September. Alex accepted this arrangement. However, he was subsequently informed that he would not receive his commission for the second quarter (April-June), which was due to be paid in July. The company’s justification was that since his FTC was technically being terminated, the payment of commission was at their discretion. This commission amounted to approximately £15,000 before tax, a significant sum for Alex. He is now questioning the legality of this decision, as his role, team, and duties remain unchanged in the transition from a temporary to a permanent employee.

Advice in such cases

In a situation like this, the contractual terms and the specific wording of the commission scheme are paramount. The argument that the payment is “discretionary” is often challenged successfully, especially when the employee has met all the conditions to earn the commission.

• Review Your Contract: Scrutinise your Fixed-Term Contract and any separate commission plan documents. Look for clauses detailing how commission is earned, when it becomes payable, and what happens upon termination of the contract. The wording is critical.
• Gather Evidence: Collate all relevant documents, including your employment contract, payslips showing previous commission payments, emails regarding your sales performance, and all written communication about the offer of a permanent role.
• Formal Grievance: If an informal discussion with HR or your line manager does not resolve the issue, you should raise a formal written grievance. This is a crucial step in the legal process and demonstrates you have tried to resolve the dispute internally.
• ACAS Early Conciliation: Before you can make a claim to an Employment Tribunal, you must contact the Advisory, Conciliation and Arbitration Service (ACAS) to start ‘Early Conciliation’. This is a mandatory step. Be aware of strict time limits; you generally have three months less one day from the date the payment was due to start this process.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of 100 GBP to 400 GBP depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored.

Applicable Sections of Law

Several areas of UK employment law are relevant here:

• Employment Rights Act 1996 (ERA 1996): Section 13 of the ERA 1996 protects workers from unlawful deductions from wages. “Wages” are broadly defined and can include commission. If the commission was properly earned according to the scheme, non-payment could be an unlawful deduction.
• Breach of Contract: The primary legal argument would likely be that the employer is in breach of contract. Even if a commission scheme is described as “discretionary,” case law has established that discretion must be exercised rationally and in good faith, not arbitrarily or perversely. Withholding an earned sum due to an administrative change in contract type could be seen as an irrational exercise of discretion.
• Implied Terms: A history of consistent payment can create an implied contractual right through “custom and practice.” As Alex was paid his commission regularly throughout his contract, this strengthens his case that payment was an established part of his remuneration.
• Fixed-term Employees (Prevention of Less Favourable Treatment) Regulations 2002: While the core issue is payment, the context is a switch from a fixed-term to a permanent contract. These regulations ensure that fixed-term employees are not treated less favourably than comparable permanent employees. The artificial “termination” should not be used to disadvantage the employee. For legal purposes, his employment is likely to be viewed as continuous.

If you are the complainant

If you are the employee in this scenario, you should act methodically:

• Do not make any rash decisions, such as resigning.
• Follow the company’s internal grievance procedure meticulously. A well-written grievance letter, possibly drafted with legal assistance, is your first formal step.
• Adhere to the strict time limits. Contact ACAS for Early Conciliation well within the three-month window from the date your commission should have been paid.
• Preserve all evidence. Do not delete emails and keep paper copies of all relevant documents.

If you are the victim

If you find yourself in this situation, it is important to understand the employer’s potential vulnerabilities:

• The employer cannot hide behind a “discretionary” clause to avoid paying sums that have been clearly earned based on performance metrics.
• An Employment Tribunal will likely view the end of the FTC and the start of the permanent role as a single, continuous period of employment. The administrative break is unlikely to be considered a genuine termination that would extinguish the right to an earned commission.
• Withholding payment could be deemed an unlawful deduction from wages under the ERA 1996.
• This action could also be considered a fundamental breach of the employment contract, which could give the employee grounds to resign and claim constructive dismissal, in addition to claiming the unpaid commission.

How the police behave in such cases

This is a civil employment dispute, not a criminal matter. The police will have no involvement. The resolution path is through the company’s internal procedures, ACAS, and ultimately the Employment Tribunal or County Court if the matter cannot be settled.

FAQs people normally have

• Can my employer refuse to pay my commission if the contract says it’s “discretionary”?
  Not entirely. “Discretion” is not absolute. An employer must exercise its discretion in good faith and not in a way that is irrational or perverse. If you have met all the performance targets for the commission, it is very difficult for an employer to justify not paying it.
• Does switching from an FTC to a permanent contract break my continuous service?
  No. In UK law, when an employee moves immediately from a fixed-term contract to a permanent one with the same employer, their period of employment is treated as continuous. The start date of their employment remains the date they originally joined the company.
• Should I claim in an Employment Tribunal or County Court?
  An unlawful deduction from wages claim is typically brought in an Employment Tribunal, which is generally faster and less formal. However, such claims in the tribunal are capped at £25,000. For a simple breach of contract claim for a higher amount, or if you miss the tribunal time limit, the County Court is an option, which has a six-year time limit but can be slower and more expensive.

What evidence is required?

• The Fixed-Term Contract and the new permanent contract offer.
• Any document outlining the commission scheme’s rules.
• Payslips showing previous, regular commission payments.
• Sales records, performance reviews, or emails that prove you met the targets for the disputed commission.
• All written correspondence with management or HR regarding the contract change and the non-payment of commission.

How long will the investigation take?

• Internal Grievance: Typically a few weeks, as per the company’s internal policy.
• ACAS Early Conciliation: This statutory process can last for up to six weeks.
• Employment Tribunal: If a claim proceeds to a tribunal, it can take anywhere from six months to over a year to reach a final hearing, due to scheduling and case backlogs.

Advocate Sudhir Rao, Supreme Court of India