For many companies, their compensation plan year coincides with the calendar year. So, as we approach the end of 2018, it’s a holly, jolly time to review, revise and plan for implementation of commission and bonus compensation plans for 2019. (And, for those companies on non-calendar year comp cycles, it’s a good time to start on that New Year’s resolution and get ahead.)
We are decking the halls with requests for commission and bonus compensation plan reviews to make it before the ball drops on December 31.
For US-based programs, be sure to consider that some states (e.g. California) have specific statutes that govern commission plans and have particular requirements like requiring that employers provide signed copies of commission plans to employees, and obtain a signed receipt of such plans from each employee, among other things. Moreover, if a plan expires and the employee continues to work under the expired plan, the terms of expired plan are presumed to remain in effect until the plan is superseded or employment is terminated.
For companies with employee populations on commission and bonus plans outside of the US, hitting that year-end deadline can be a bit more daunting. Recall that in most jurisdictions outside of the US, changes to terms and conditions of employment cannot be made unilaterally and require employee consent. For this reason, best practice is to keep commission plan details separate and apart from employment agreements, because once the details are in, the practical effect is that you likely can’t just change the plan without employee consent. To ensure your incentive rewards strategy aligns globally and is also locally-compliant, it’s best to work with counsel with a wide geographic footprint.