How to Pay the Basic Salary and Variable Pay Separately?

What is commission?

the Employment Ordinance, the definition of wages includes commissions (except for commissions that are of the nature of rewards or at the discretion of the employer). Therefore, with the exception of commissions that are of a reward nature or at the discretion of the employer, all commissions are wages and must be in accordance with the provisions of Employment Ordinance and be paid.

*If you are in arrears of wages, including commissions, upon conviction, you are liable to a fine of HK$350,000 and imprisonment for three years, and interest should be paid on the outstanding amount.

How to pay multiple times a month?

A trading company A has a large number of departments and employees, and it is not possible to calculate the commissions of employees before the pay day. So how to divide the basic salary and variable pay in accordance with the regulations?

According to the provisions of Article 6(5) of the Minimum Wage Regulations regarding the payment of commissions in multiple or instalments after agreement:

1. With the prior consent of the employee

2. Commissions paid at any time after the first 7 days of the wage period and before the end of the 7th day immediately after the wage period.

It shall be counted as part of the wages payable for the wage period, regardless of when the work is performed or when the commission is payable under the employment contract.

In short, if you want to settle the basic salary and commission separately, you must agree in advance in the employment contract, otherwise it will not apply. And the commission needs to be paid at any time after the first 7 days of the wage period and before the end of the 7th day immediately after the wage period.

In addition, according to the regulations, the date of commission payment can determine which wage period should be paid and to further determine whether the employee’s wages meet the minimum wage requirements.

Can the commission be paid in advance?

As mentioned in the first question, according to the “Employment Ordinance”, with the employee’s prior consent, the employer can prepay the commission to the employee and determine the wage period for which the employee’s salary is paid according to the time of payment. It is able to determine if the salary has met the minimum wage requirements, and whether it is included in the calculation of year-end remuneration, maternity leave pay, paternity leave pay, annual leave pay, etc.

Q&A

Example 1

Sarah: I am a salesperson who joined company A on 1st July. The employment contract stipulates that employees can receive a basic salary + commission. Wages are paid every Gregorian calendar month, of which commissions are paid during multi wage periods. According to the “Minimum Wage Regulations”, employers can pay commissions before 7th August. Sarah calculated the basic salary paid in July and found that it was lower than the minimum wage, so she disputed the salary.

Workstem Answer: When judging whether an employee meets the minimum salary standard, the salary must be paid every month, including the commission paid in instalments in accordance with the contract, regardless of whether the employer pays it on schedule.

Example 2

David: I am the employer of Company B, and my employees applied to me for a commission in September. I paid HK$2,000 for the employee’s September salary period on the 27th this month. If I want to determine how to provide MPF contributions and determine whether I am responsible for the minimum wage standard, what basis should I use to calculate it?

Workstem Answer: Since the commission is paid between 8th September and 7th October, it is counted as September’s salary.

Example 3

David:If I pay a commission of HK$2,000 and HK$3,000 in advance on 8th August and 7th October with the prior consent of the employee, will the two commissions still belong to the December wage period?

Workstem Answer: When judging whether the employee’s salary meets the minimum wage requirement, the commission of HK$2,000 will be included in the August salary because it is paid between 8th August and 7th September. The second commission is paid between 8th October and 7th November, so it is counted as wages for the month of November. Neither of these two commissions are counted as wages in December. Therefore, when calculating year-end remuneration, maternity leave pay, paternity leave pay, severance pay, long service payment, sickness allowance, holiday pay, annual leave pay and payment in lieu of notice, different bases should be used for calculation.

David: Oh~ I see.

What should Worketem users do when dealing with commission-related issues?

Complicated tasks such as salary and commission calculations not only involve regulations and professional knowledge, but HR employees also need to keep abreast of market trends, the latest news, and participate in assessments.

If companies want to perform calculations such as salary and commissions efficiently, they need an automatic set of systematic processing methods, otherwise they can only spend a lot of time dealing with these unquestionable and trivial tasks. At this time, a set of mature salary management tools can not only help companies solve the above-mentioned problems , but also help calculate accurately and quickly.

First pay: commission pay

Step 1: After clicking the variable pay item, you can choose to import variable pay in large quantities to import commission data with one click or click Add variable pay to add items.

Step 2: If there is a problem with the salary data  before pay run, re-import can choose whether to update and overwrite the old data, or you can edit the individual problem data in real time.

Step 3: Select temporary calculation in the new calculation, and select variable pay items in the advanced settings. After completing the provisional calculation settings, click Add provisional calculation, select the provisionally created rule, and perform commission payment.

Second salary payment: basic salary payment

Step 1: Go to Payroll > Pay Run, select Add Calculation, fill in basic information and click CalculationStep 2: After completing the check, click Next and payNote: If you separate the payment, the system will calculate the employee’s MPF-related contributions based on the sum of the two results. When the company needs to personalise the salary frequency, such as weekly salary, you can select the formula you need in the payroll policy setting and repeat the above steps.

Workstem’s payroll system can bulk import variable pay items to help calculate commissions. It can also provide employees with multiple payrolls a month through temporary calculations and new calculations to help you quickly count data and accurately calculate payments. Meet the points of a mature payroll management tool – efficient and accurate.

What are you waiting for? Click the link now to enjoy a 14-day free trial !

Read More: Payroll Calculation is Not as Easy as You Think

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