News: 1618485249

The following is my option, IANAL...

But although this sounds like it's legally legit, it's a real dick move by SAP. The whole point of commission is to encourage your salesman to sell. If your salesman is under the impression he's going to get a hefty chunk of a big contract, and then you wave a get-out clause at him after he closes the deal, he's not going to try very hard any more, is he. Neither is the rest of your sales force, once they hear of it.

I hope SAP are looking forward to having their sales capped at whatever point the commission runs out.

"But although this sounds like it's legally legit, it's a real dick move by SAP."

SAS not SAP.

Assuming the bonus depends on both revenue and margin, customers will be able to get quite nice pricing in future as sales no longer cares about high margin beyond a certain contract size :)

So if you're a bigger customer for SAS, now is the time to renew :D

> So if you're a bigger customer for SAS, now is the time to renew :D

Or take some R courses?

If your salesman is under the impression he's going to get a hefty chunk of a big contract, and then you wave a get-out clause at him after he closes the deal, he's not going to try very hard any more, is he.

But he's a salesman. And he'd have read, agreed and signed his sales commission plan. Which said-

Any payout over 300% of On Target Variable Pay is subject to review and approval by the Executive Vice President and Chief Sales Officer…

Which IMHO is fairly common in sales, ie some form of capped commission to deal with bluebirds. Which also includes things like funnel reporting and forecasting, so it shouldn't have been a great suprise this deal landed. Which then gives sales management and the sales person a chance to negotiate.

It can also be a bit of company self-defence mechanism given rules around revenue recognition and how easy (or hard) it would be for the customer to re-negotiate or terminate a contract, ie if they cancel after yr1, the deal isn't a 5yr deal any more, so commission on the whole thing gets risky. But I've also seen sales people get burned when companies cock up and sales lose the commission. Conversely, I've also seen situations where sales have offered very generous customer contracts because they've been commissioned on revenues, not margins.

I hope SAS are looking forward to having their sales capped at whatever point the commission runs out.

That's normal. So what to do if when a sales person hits their target early in the year. If that was because it was a star sales person, then it's in the companies interests to keep them happy.

If your salesman is under the impression he's going to get a hefty chunk of a big contract

It means he didn't read his own contract, the bit where it says deals of 300% over target are open to review.

I can understand why he's unhappy, but contracts bind both parties, if he signed it without understanding it he really doesn't have a case.

Capping payouts is pretty normal. They could have paid it, given him a target of 27m next year "you've shown you were capable of it", and then he would have earned no commission when he didn't meet it. Would that have been better?

"It means he didn't read his own contract, the bit where it says deals of 300% over target are open to review."

The contract also said that this clause would be interpreted with reasonable fairness. Of course that doesn't mean anything legally, but since he probably had some advance knowledge of the sale being made, he should have put out some feelers before, and pre-negotiated a fair compensation with his bosses. For example if immediate recognition of the bonus was a problem for SAS they could have arranged a staggered payment.

I'm with sales on this one. They boy done well and should be paid accordingly.

Any customer or potential customer will now likely be very wary of them after this. If this is how they treat their sales people, then how do they treat their customers? This very much sets the tone that any customer can expect from them if things go wonky.

Doesn't this mean that their sales team are going to stop caring once a sale gets beyond ~9 million or so as they won't get any increase in comission beyond that?

So difficult to negotiate £27 million contracts will become super easy to negotiate £10 million contracts? granted possibly not quite so extreme.

But none of the other sales staff and potential recruits will ever get to hear of this will they? What's that Ms Streissand?....

... As the judge goes around SAS's MD for dinner later that same day.

This is really dodgy, and I hope it backfires on SAS. It's clearly unfair, 'review' does not mean 'automatic cut to under half of what was expected, and then cut even further punitively'.

Sure, spread the bonus out over three years (350/300/250 say) to reduce the effect on profits (but why? surely the company's profits are boosted by the deal more than the cost of the commission?).

> to reduce the effect on profits (but why? surely the company's profits are boosted by the deal more than the cost of the commission?).

This.

Either SAS fucked up their commission structure, or the whole "but what about our profits" thing is a bit of a red herring - the sale price presumably included enough margin to cover the commission rate.

It might have been legal, but it's also a damn good way to dissuade any (good) potential employees from bothering

"surely the company's profits are boosted by the deal more than the cost of the commission?"

Wouldn't be so sure about that. The article says that they made 4.2M profit on 121M turnover in 2019. That's only about 3.5%. This sales person makes a sale for £19.54M (according to the exchange rates quoted in the article), 3.5% of that is less than £700k. So £800k commission might have more than offset the profit.

What's the betting his managers still got the full bonus?

>What's the betting his managers still got the full bonus?

And those bonus's totalling more than £800k and being paid in the same month...

He worked, he got paid. Easy.

Hope the Streisand effect kicks in, and the company's reputation got damaged all over the world.

Failing at tribunal because the terms covered the company actions is unfortunate for him (although 800k for a single client sale would be excessive pay - IT salesmen get far too much anyway). What's confusing me though is the judge's reported comment on SAS profits.

Yes, paying 800k in commission would hurt their profits. So what? The margin on that contract would cover the commission anyway, and if not they didn't have to sign and agree it.

"I can't pay you because it would reduce company profits" just doesn't sound like a valid argument.

"The judge also ruled that because Hanson's commission was payable as a lump sum, forcing SAS to pay him the £800k in one go would harm the company's profit margins"

"There is nothing irrational or perverse in a commercial concern wishing to maximise its profits,"

So to paraphrase the judge: "A company can screw someone over so their profits look better."

Last I knew profits were determined after paying out your costs, i.e. what you agreed to pay someone (ignoring clause 6h)

Seems to me like the judge has some bias going on here which could lead to their ruling on 6h being a proper term. Especially praising SAS's wisdom.

Well let's hope the customer demands an 800K discount because the cost of the contract has fallen.

I hope future SAS employees become aware of this and ask about it.

... It was a dick move. They could have negotiated a deal with the guy to pay the commission in instalments, instead they cut it in half, and then to a third of the original commission.

To be fair to the judge, he has to consider the merits, the legalese in the guy's employment contract and T&Cs, and that's it. And the terms said "beyond 300% needs to be approved" (I paraphrase). If the approval was not granted, you take the 300% and move on. If you didn't read your T&Cs, more fool you.

Life sucks. And sometimes it throws you lemons like this one to suck on.

Para 26 a. "That there was a 300% cap"

That isn't what clause 6(h) of its Sales Compensation Plan says. It merely gives a cap on what can be paid out without review and authorisation from specific members of senior management.

The only question is about the intent of "subject to review and approval" in clause 6(h). ie. does it permit the reduction of commission due, at the whim of the senior management or does it permit payment to be linked to future performance etc.

Interestingly, para 49 discusses whether "reasonability and fairness" could be applied to clause 6(h) and the judge decides it can't!

Reading the judgement, it does seem the defendant didn't do themselves a service by not clearly presenting their case and the reasoned grounds for their complaint.

It also doesn't paint the judge in a particularly good light, who in several places makes, in my opinion, basic mistakes eg. treating the 300% as a cap on payment and then siding with the employer - it is irrelevant that the deal was over 5 years (para 69(e) ), the presumption the Tribunal makes is based on conjecture and not either the Sales Compensation Plan (ie. there is no reference to the SCP and thus it is reasonable to conclude it is not mentioned.) or on a offer made to the salesman to pay commission over 300% in installments over the life of the contract...

Takeaway: if going to tribunal, get your ducks in a row and carefully prepare your case.

Ideally, get a legal bod to set out your case before you rush off.

The sales bods (or Account Managers as they prefer to be called) where I work have some funny ideas about remuneration.

The company pays commission based on revenue, quite rightly in my opinion. You don't get your commission based on the date of the sale. You get it when the company pays for the goods. So with a one off sale you will receive your percentage of that sale when the bill is settled. Sell a five year contract and you will receive your commission monthly or quarterly when that period's bill is settled.

There are very sound business reasons for this. Imagine a five year contract to be paid monthly. Each monthly payment would be only 1.6666666% of the total. So imagine the company pays 5% of the total in commission. It would be four months of bills before the company got a single payment from the customer of which a single penny did not go direct to the sales bod.

Imagine further that the customer went bust before the end of the contract. Why should the salesperson have received their 5% up front? Six months in and the customer goes bust. The salesperson has received 5% of the gross and the company has also only received 5% of the gross.

Companies who pay commission up front are beyond foolish.

We had a new sales person who started complaining about this arrangement about three months into his employment. He threatened the company with legal action. The sales director told him "You want your commission as a lump sum? You negotiate a contract where the customer pays for the service as a lump sum."

>Companies who pay commission up front are beyond foolish.

It is interesting how many of the mobile phone/contract resellers changed their commission/cashback schemes from payment upfront to one's where commission and cashback are paid after the contract has been in effect for some months. It is clear they took a hard lesson in cashflow management.

Indeed this is even better for the sales bod, assuming they makes sales a few times a year, but not all the time. It smooths out the income (which may be good for tax purposes as well, if you have good years then bad years). Some upfront payment should be negotiated into the contract though, or bonus at some early point of the contract.

Obviously you'd want a term in the contract about cashing in upon termination/quitting the role, or otherwise ensuring the money is paid over the time.

The downside is if your own employer goes bust, you won't have that money - on the other had the client isn't going to be paying your bust employer either, so what can you do.

How about we capriciously and arbitrarily hold back Judge Holmes' salary for a few years and see if his views on fair and equitable treatment are altered?

Anyone that believes that SAS have a 0.135% profit margin. Does anyone anywhere really think that the $27m contract netted the company a grand total of $36,500 profit? I smell KPMG accounting processes at work here.

The contract is over 5 years, so they will book $5.4m in income per year.

"... the judge, who heard the strike-out application alone and not as part of the usual three-member panel."

This makes it an iBunal, explains everything.