Fast FAQs

What are the relative merits, in legal terms, of employing a travelling sales person on salary plus bonuses, as against self-employed on commission?

There are arguments for and against, in both cases.

If you employ someone, on a salary-plus-bonus basis:

• You can make it a condition of his (or her) employment, that he does not work for anyone else.
• You will have much more control over his time.
• you should have much better control over how he deploys his time - for instance, the extent to which he spends time on keeping existing customers happy, as opposed to chasing new ones (or vice versa).
• Depending on how much you are prepared to pay in salary, the overall package is likely to be much cheaper.

On the other hand:

• You are committed to paying a salary, whether or not there are results to justify it.
• You will have to spend time and money on managing your sales person, which both of you may find irksome.
• You may end up with vicarious liability for some of his actions. For example if he causes an accident whilst visiting a customer's premises for you, you will generally be responsible for any injury, damage or loss arising from the accident.

If you use someone on a self-employed basis:

• You will not have to pay anything (possibly not even selling expenses, depending on the contract), until sales have been made.
• What you pay will be directly related to sales made.

On the other hand:

• Whatever volume of sales is made, it is likely to cost you far more than the same volume sold through an employee, even after allowing for the hidden costs of employment (holiday pay, sickness pay, etc).
• A self-employed sales person is unlikely to be working for you alone, so to some extent you will have to take your turn in using his expertise.
• It will be more difficult to control what he is doing and how he is doing it.
• He will be entitled to a regular statement of the commission due, under the Commercial Agents Regulations, and access to all the information he needs to check that statement.
• You may have to consider other implications of the Commercial Agents Regulations.

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