Legal Ramifications of Not Automating Your Sales Commissions Properly

Not automating your sales commissions properly is not just going to cause problems with your staff or HR; it could also cause problems with the law. We take a look at a real life example of when unpaid sales commissions go wrong and what you can do to prevent this from happening to your business.

Breach of contract

In 2013, a Texas based IT company, CynergisTek Inc, was taken to court by a former employee who claimed she had not been paid the correct sales commission for 2 years. Stephanie Crabb, took the firm to court after claiming she was not properly compensated for sales commissions, and expenses, throughout 2011 and 2012. The sum Stephanie Crabb took CynergisTek Inc to court for was $75,000, which included damages, losses, court fees, expenses and penalties. The allegation was that a there was a breach of contract between Crabb and the IT company. Regardless of the resolution of the case, the company had to go to court and fight the case. Why does this happen? There is a good chance that Stephanie’s commission was not calculated correctly, the commission statements may not have been periodically and properly issued or the documentation for the sales commission plan was not clear. Whether your employees are on a commissions pay only or a base salary plus commission, this could happen to your business!

The Importance of Automating Sales Commission

If you run a business that pays employees commissions, then you will know how difficult it can be to keep on top of the calculations. Different levels of salespeople may have different rates of sales compensation and these can be calculated in a whole range of ways. In fact, there may be a different commission pay structure for every single team member, which is certainly difficult to calculate. Mistakes are bound to be made, even if your payroll employee is very astute. With an automated sales commission software solution, the risk of human error is reduced and your employees can receive the right compensation for the work they have done. This ensures you can avoid a situation like the one in which CynergisTek found itself!

 

What Does Sales Commission Software Do?

A good sales commission software, like the one by QCommission, ensures that you pay people properly. First, you can import your important documentation, invoices, expenses and even sales orders from accounting systems such as QuickBooks or Microsoft Dynamics. You can then put together your sales commission plan, to include all of the incentives for each employee. Software such as QCommission comes with sample plans, to make it quick and easy to get going. Statements and reports are then used by combining the data imported from the accounting systems, with the sales commission plan that has been set-up for that employee. It is quick, simple to use and fully automated. All your payroll employee has to do is drag and click on the software; they can even double check that everything is correct if they want! This will take them minutes as opposed to days of calculating everything individually.

 

If you want to avoid a potential court case, or an upset employee, then you need to be paying people properly. There are serious ramifications of not automating your compensations properly, as we saw from the real life example.

-Rebecca W

Leave a Reply