Are employers obligated to disclose their commission structure to employees?

THE QUESTION

As an inside sales rep, my husband's compensation is salary plus commission.

A monthly report summarizes sales and targets for all the staff but leaves out the formula for how the commission is calculated for the inside and outside reps.

When he asked for clarification and transparency, his manager told him not to worry about it, basically refusing to provide the information.

Is there any legislation that compels employers to share commission calculations with employees?

THE FIRST ANSWER

Daniel Lublin

Partner at Whitten & Lublin Employment Lawyers, Toronto

Each province has legislation that addresses employment standards, which are designed to protect employees.

In Ontario, employers are required to provide a pay statement for each paycheque that explains the wage rate, how the paycheque was calculated and the amount and purpose of any deductions from wages.

In British Columbia, when an employee is paid commissions, employers have to provide a pay statement explaining how commissions are calculated for work the employee is paid for.

In Alberta, an employer must keep records of all wages and upon request of an employee, the employer must provide a detailed statement explaining the employee's earnings and how they were calculated.

Employers who violate employment standards legislation can be subject to penalties and fines that vary among the different jurisdictions.

The bottom line: Your husband should be provided with a wage statement that explains his commissions.

THE SECOND ANSWER

Doug Ewen

Certified Human Resources Executive, Midland, Ont.

Although the company may have reasons for not disclosing the commission structure, it can be frustrating and demotivating for those affected, particularly if commission makes up a significant portion of their compensation.

From a company standpoint, the manager is wrong for simply saying don't worry, without explanation. The company and the manager are missing a tremendous opportunity to direct sales, motivate the team and earn credibility.

If your husband likes his job, then he should continue to request an answer in a professional manner. However, don't just go in with the problem – go in with some suggestions. He needs to provide compelling benefits for the company to formalize and disclose the information. Before his next discussion, quantify those benefits, including emphasis on key products, reduced stress on the sales team as a result of uncertainty and better focus on customer needs, among others.

His goal in this situation is simply to get an answer. Either he convinces the company to create and disclose a formal commission structure or he gets an explanation as to why they cannot or will not set the structure. The key on his part is preparation. He is a sales professional; use that skill to make his case for an answer.

Once he gets his answer (whether it's yes, no, or no with an explanation) he then needs to decide if he can work with it. If he can, carry on and drop it. If he cannot, then he needs to move on to a job with more earnings clarity.

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