Employers NI on commission

[Legend83]

This is not my area of expertise so wondering if the PH bean counter brigade might know the answer.

A friend's employer is creating a commission structure at her work and she has been asked to sign a contract which effectively states she will bear the additional employer NI / payroll costs that result from any commission she earns.

Is this allowed?

[edc]

So whatever the additional NI cost is they will deduct from the total net commission amount paid to her. It's not necessarily fair but if that's what they agree to then fair enough. It might just be easier to raise the commission threshold or lower the percentage paid.

[Countdown]

Legend83 said:

This is not my area of expertise so wondering if the PH bean counter brigade might know the answer.

A friend's employer is creating a commission structure at her work and she has been asked to sign a contract which effectively states she will bear the additional employer NI / payroll costs that result from any commission she earns.

Is this allowed?

Yes.

[Eric Mc]

I would argue the point on what the agreed rate of commission is.

If a contract says to an employee that the commission rate is X percentage - then that should be the Gross Rate WITHOUT Employer's NI being involved.

What is the precise wording of the contract between the employer and the employee specifically in regards to the commission rate?

[Countdown]

Eric Mc said:

I would argue the point on what the agreed rate of commission is.

If a contract says to an employee that the commission rate is X percentage - then that should be the Gross Rate WITHOUT Employer's NI being involved.

What is the precise wording of the contract between the employer and the employee specifically in regards to the commission rate?

I agree that would be the case if it was contractual but, in this case, it's not likely to be (it's something the Employer is creating and I doubt he wants the hassle of everybody signing new contracts).

Ironically I know companies which agree to do the opposite I.e. agree that a team will receive £x net. Payroll then gross up the payment for tax, ees and ers NI, and ees and ers superann. CEO is then surprised at how much the "real" cost is.

[edc]

I have done the gross up recently too and it amounts to just about double the cost!

[Eric Mc]

Countdown said:

I agree that would be the case if it was contractual but, in this case, it's not likely to be (it's something the Employer is creating and I doubt he wants the hassle of everybody signing new contracts).

Ironically I know companies which agree to do the opposite I.e. agree that a team will receive £x net. Payroll then gross up the payment for tax, ees and ers NI, and ees and ers superann. CEO is then surprised at how much the "real" cost is.

Even if it's "verbal" it's a contract. Therefore, people need to be 100% clear what is meant when percentages are bandied about.

If an employer said to me, you will receive 10% commission on each sale, they had better really mean that I will get 10% and not some lower figure because they are not willing to pay the Employer's NI they are legally obliged to on the 10% commission amount they have told me I will be receiving.

[Legend83]

Thanks all for the advice. She said the contract states she would receive x% commission but be liable to pay the employers NI out of that % received.

She also said this change was made last minute and they have as yet not provided her with example calculations of what amounts she might be liable for....

[edc]

It should be reasonably straight forward to work out https://www.gov.uk/national-insurance-rates-letter...

However, on a side note, this commission scheme is not going to have the impact the company might desire as for a start the individual cannot see clearly how they derive their commission.