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9 April 2020


Should you pay employees commission as part of any furlough pay?

Posted by: Russell Brown

There has been a lot of uncertainty in the last few days surrounding the issue of commission and whether it should be included in the payments made to employees who are furloughed.

Government guidance states:

You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.”

 Unfortunately the guidance doesn’t make clear what it means by “compulsory commission payments” which has been taken to mean contractual commission.

The view of most people has been that this means, when making payments to furloughed workers, an employer should include commission which has been earned prior to a person being furloughed and thereafter basic pay as commission cannot be earned whilst you are furloughed.

Yesterday however on Twitter, there was an exchange between a representative on the HMRC Customer Support Twitter account and a member of the public seeking clarification on this point. The question was asked:

“Commission now included…does that mean 1) commission already earnt on previous sales, then base wage only as won’t be earning commission if #furloughed or 2) calculated akin to annual leave rules and so in with ‘employees whose pay varies’ rules so 80% average?”

 The response from HMRC was:

“Hi, it would be in with 2, The wage varies but only compulsory commission payments, Steve”

 A further question was then put to HMRC:

“And just to clarify further, compulsory = contracted and so part of every wage/salary in normal trading circumstances”

 The response from HMRC was:

“Yes, that’s right. Steve”

 As many know, the rules relating to the payment of annual leave require employers to apply an average of salary received during the immediate preceding 12 week period prior to taking leave (which changed to 52 week period on 6th April 2020) for workers with no normal working hours and workers with normal working hours but whose pay varies with the amount of work done or the times or days on which it is done, this being the point made by the member of the public in her original question to HMRC above when she stated “akin to annual leave rules”

 This is similar to the government guidance for payment of salary to those furloughed workers whose pay varies which states:

“If the employee has been employed for 12 months or more, you can claim the highest of either the:

  • same month’s earning from the previous year
  • average monthly earnings for the 2019-2020 tax year”


 The response from HMRC therefore appears to suggest that HMRC’s view on the issue of commission is as follows:

  • The reference to “compulsory” commission means contractual commission.
  • When you calculate a furloughed worker’s salary, if they are entitled to commission in addition to basic pay as part of their contractual remuneration, you don’t just pay commission earned prior to being placed on furlough leave and then just basic pay. Instead, you should calculate it in a way similar to holiday pay under the “Pay varies” section of the government Guidance (see above) which involves either paying the same amount as they received in the corresponding month the previous year, or average monthly income earned during the 2019/20 tax year.


This is obviously far more beneficial for workers and in the spirit of what the Coronavirus Job Retention Scheme was intended to achieve. There is one slight note of caution however, which is that Steve at HMRC may have got it wrong and has misinterpreted his employer’s stance on the matter. That seems rather unlikely and one would hope that the point will be confirmed by HMRC in a more formal manner in the very near future. In the meantime however, it is the clearest guidance we have received to date on the issue of whether to include commission when paying salary to those on furlough leave.


Russell is a Partner and Head of Glaisyers' Employment Team.

Russell Brown - Partner

To discuss how Glaisyers can assist you contact Russell Brown on or via 0161 832 4666.

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