Commission Question

Question

There's a job I sold at 40% commission after the cost. The cost of materials and stuff like that would be taken out before arriving at the profit margin. My commission is 40% of the profit.

We buy a product at 14.50 per unit, I sold it at 35 per unit. The company said they pay 20 per unit and based my commission from 20 and not the 14.50. This was not in our commission agreement. They are changing me 5.50 per unit I sell and also collecting 60% of the profits.

I asked them about it and they fired me. Come to find out, they are taking company running cost from my commission and job cost as well. Basically, taking their rent/bills and taxes obligations out of my commission.

Is this a normal thing? I have them on audio stating they pass their taxes on to the employees because we provide services that aren't taxed to customers. Can they do that?

Answer 1

Assuming that there's nothing in the law that prohibits it, the contract would determine what's allowed.

Does your contract specify how "profit" is defined and what the included costs are? If costs are limited to material costs and other unit costs specific to the commissioned work in question, then it can be argued that costs that impact the overall business (rent, utilities, etc.) should not be considered costs for the purpose of determining "profit" and should be based on a cost of 14.50. However, if the way "profit" is defined in the contract includes a pro-rated portion of rent, utilities, other overall business costs, etc., then it could be argued that those things should be included and "profit" should be based on a cost of 20.

This is a contract and legal question. If you want to challenge this, you need a contract lawyer, and maybe an employment lawyer too.