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Do you know how to calculate annual leave for commission earners?

by , 19 March 2015
When it comes to calculating leave for comission earners, there's a lot of confusion.

But it doesn't have to be that way.

Today we reveal how to do this tricky calculation in a manner that doesn't breach labour law.

Here's what the law says about annual leave pay and commission earners

You must factor in commission earnings for your employee when paying annual leave. To do this, you must calculate how much you should pay him according to his earnings for the preceding 13 weeks (Section 35(4) of the BCEA).

Here's and example of how to do this:

This example illustrates how you should calculate annual leave pay for your commission earners

Robert, a salesman, earns a basic salary plus travel, petrol, subsistence allowances etc. He earns commission on his sales at an agreed percentage. He's made R32 500 commission in the 13 weeks before he's due to go on annual leave. You have to pay him for the commission he might've earned if he wasn't on leave.

This will be a pro rata amount for the number of days' he takes. For example, if Robert takes one week's leave, you'll have to pay him R2 500 in addition to his basic salary (his commission divided by 13 weeks). If he takes two weeks' leave you have to pay him R5 000 as well as his basic salary.

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An ineffective leave policy could cripple your business from right under your nose

Did you know that not forcing your employees to take their annual leave could end up costing you anything up to R15,000 per employee?

That's right - employees that don't take leave could be costing you just as much as those that abuse it.

That's because any leave that's accrued into the following financial year will increase the leave bill for your company and therefore severely affect your organisation in the long run.

That's why I'm excited to introduce you to a resource that completely takes the stress and confusion out of managing annual leave in your company.

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Note that you must include commission when calculating your employee's leave pay. If your employee's pay fluctuates significantly from period to period, any payment to him must be according to his remuneration during the preceding 13 weeks (Section 35(4) of the BCEA).


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