Unpaid commission or bonus after leaving employment

This is a common and often contentious area of employment law. The answer depends heavily on the specific terms of your contract, any commission or bonus scheme rules, and the circumstances of your departure.

Starting point:

Whether your employer can withhold commission or bonus after you leave turns on the nature of the payment, the contractual terms, and in some cases how those terms have been applied in practice.

Contractual entitlement versus discretionary payments:

The first distinction to draw is between payments you have a contractual right to receive and those that are genuinely discretionary.

If your contract of employment or a separate commission or bonus scheme document sets out a clear formula or criteria, and you have met those criteria, then generally you have a contractual right to that payment. Your employer cannot simply refuse to pay it because you have resigned or been dismissed, unless the contract specifically and clearly allows them to do so.

If the bonus or commission is described as purely discretionary, the employer has more latitude, but even then there are limits. A discretionary bonus must still be exercised in good faith and not in an arbitrary, capricious, or irrational manner. This was established in cases such as Clark v Nomura International plc and Keen v Commerzbank AG.

Common clauses used to withhold payment:

Many employers include clauses that say you must be employed and not under notice on the date the bonus or commission is paid. These clauses are enforceable in principle, but their effect depends on how they are worded and how the scheme operates. Key points include the following.

1. If commission relates to work you have already completed, for example sales you personally closed, it is harder for an employer to justify withholding it. Courts have sometimes found that commission earned by performance becomes a debt owed to you, regardless of your employment status at the date of payment.

2. If a bonus is described as a reward for past performance rather than an incentive to remain employed, a "must be in employment on the payment date" clause may be viewed more critically, particularly if it would deprive you of a substantial sum through no fault other than having resigned.

3. The wording matters enormously. A clause saying you must be in employment "at the date of payment" is different from one saying you must be in employment "at the end of the performance period".

Unlawful deductions from wages:

If the commission or bonus has been earned and is properly payable, withholding it may amount to an unlawful deduction from wages under Part II of the Employment Rights Act 1996, specifically sections 13 to 27. You can bring a claim in the employment tribunal for this, and you do not need to have been dismissed to do so. The time limit is three months less one day from the date the deduction was made, meaning the date the payment should have been made.

Constructive dismissal or breach of contract:

If you were dismissed, or if the refusal to pay formed part of a pattern of behaviour that caused you to resign, there may also be a breach of contract claim or in some cases a constructive dismissal claim, though the latter requires qualifying service of two years.

Practical steps you should take:

1. Gather all documents. This includes your written contract of employment, any commission or bonus scheme documents, any offer letter, any relevant emails or correspondence about the scheme, and your payslips.

2. Check the exact wording. Look carefully at what the contract and scheme documents say about eligibility, conditions for payment, what happens on termination, and whether any clause says you must be employed or not under notice at a particular date.

3. Calculate what you are owed. Work out what commission or bonus has accrued based on work already done or targets already met.

4. Raise it in writing. Write to your former employer setting out clearly that you believe you are owed the payment, why you believe you are entitled to it, and asking them to pay within a reasonable period, for example 14 days.

5. If they refuse, consider your options. These include an employment tribunal claim for unlawful deduction from wages, a county court claim for breach of contract, or using ACAS early conciliation as a first step, which is mandatory before bringing a tribunal claim.

Important factors that affect the answer:

The precise answer in your case depends on several things I do not yet know, including the wording of your contract and any scheme rules, whether you resigned or were dismissed, whether you were still in a notice period when the payment fell due, the nature of the payment and what it relates to, and whether there is any custom and practice around how the employer has historically treated leavers.

If you can share the relevant wording from your contract or scheme documents, I can give you a much more specific view on where you stand.