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How do we handle outstanding commission payments for an employee who is leaving the company?

All wages earned by an employee must be paid upon termination, and by definition, commissions are considered wages. However, commission payments are unique and present special issues regarding the timing of final payments. In many cases, commissions are delayed until payment for a sale has been received from the customer; therefore, it would be impossible to calculate the total amount due when payments have not yet been received.

Employers will need to review any employment agreement or commission plan agreement to ensure payment of commissions follows the agreed-upon terms. A majority of states have wage payment laws that outline the specific requirements for the payment of commissions to terminated employees.

Steps should also be taken to communicate to the employee that all commission payments will be processed according to the terms of the commission agreement. It is possible that the employee will receive several commission payments following separation of employment and the employer may want to create a spreadsheet of all open orders, indicating the amount of the commission pay anticipated for each order. Reviewing the company's procedures for processing commission payments with the employee may also be helpful should an order fall through and a commission payment be lost. The employer should maintain open communications with the former employee until all commission payments have been paid.


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