How Should We Handle Full and Final Settlements for Sales Teams with Unmet Collection Targets?

Procedure for Full and Final Settlement of Sales Team Members

I need your expert advice on the procedure for the full and final settlement of sales team members. Sales representatives have sales and payment collection targets, and we provide incentives based on sales completed every month, regardless of payment collection. Should we delay the FnF process until all collections are made, or consider making partial payments of the FnF amount?

In the past, we have encountered challenges where the company paid the full and final amount, but the employee did not cooperate with payment collection. Although we communicated this to the employee in advance, it was not documented. The company I am working with does not believe in harassing or delaying employees' salaries. We simply want to know the legal way to prevent such situations.

Thanks in advance.

In such scenarios, it is better to release the fixed part of the salary first and then release the incentive once the same is actually earned by him.

Dear Manorama Singh, as the very term would suggest, after "Full and Final Settlement," the employer-employee relationship ceases to exist. Therefore, you cannot hold an employee responsible for any pending sales collection. In this scenario, the employee acts as an agent of the management in credit sales as per the given norms. Once the employee formally exits from employment, they do not have the authority to collect any pending amounts from customers. You have acknowledged that incentives are paid based on sales and not on the collection of sale dues. Hence, it is my personal opinion that full and final settlement cannot be delayed for outgoing employees as the incentive is solely based on the volume of sales.

Thank you.

In private organizations, the salary of a salesperson will be split into two components: a fixed component and a variable component. The variable component will always be payable subject to the performance of the employee or will be linked to sales and collection. Since the amount cannot be quantified in the same wage month, the variable pay for one month, say October 2019, will be paid along with the salary for November, payable in December. I think the issue Manorama Singh is facing is related to this payment structure.