Tip Of The Month: Common Pitfalls To Avoid When Drafting Global Compensation Plans (February 2010)

Paying employees on a commission basis is commonly accepted as a good way to increase sales of a product or service – in the United States. Outside the U.S., commission plans are far more problematic. What is perfectly legal in the U.S. simply won't pass muster under the invasive labor laws of many other countries. A company that decides to simply roll out a compensation plan across borders in other countries without first ensuring that it complies with local labor laws may find out too late that key aspects of the plan are void or unenforceable.

One Plan Or Many?

It is often tempting for a multinational company to try to harmonize the laws of several different jurisdictions and arrive at a uniform companywide commission plan that can be utilized across the globe. However, while clearly an admirable goal, the idea rarely works in practice. Too often, the changes required to make a key provision acceptable under one country's laws make it unlawful in another