Salary vs. Employment Contract -- Should I Sign?
Dear Stanley,
What are your thoughts on employment contracts? I've been with my company happily for several years on a salary. Now I am being asked to sign a contract and to switch to commission. It seems generous enough, although a bit less secure than the salary and bonus structure that I'm used to. But mostly, I'm wondering why the company suddenly wants everyone on commission and if there are ramifications to the employment contract (i.e., is it easier to let me go?). Help!
Signed,
Suddenly Insecure
Dear Justifiably Nervous,
Remember that old song by the Band called "The Weight"? In that fine tune, which has now attained the status of Played Out on most boomer iPods, the narrator tells a story in which various individuals shift the burden of their responsibilities to another. One gives away his dog. Another leaves her friend with a new companion -- The Devil. The well-known chorus goes like this:
Take a load off Fannie.
Take a load for free.
Take a load off Fannie
And... and... and... you put the load right on me.
That weight you suddenly feel on your shoulders? That's the burden of the risk associated with your employment that just shifted from the shoulders of the company -- and... and... and... they put the load right on you. It's not necessarily a bad thing. If you're a top performer and have confidence in your abilities to earn a good commission, you could actually do better. But the reason you feel nervous now is because you should. That cold wind is prying into your bones because your security blanket just got taken away. You're going to have to sing for your supper every day now if you expect to make your nut.
The reason companies do this is quite obvious: If you underperform, or the economy stabs you in the heart, they have to pay you less. That falls into the No Duh category, doesn't it? If they end up paying you more, it means that you're selling your gonads out, and that's good for them, too. So it's a win/win either way. The only thing the company loses is the strong tie that a salary and bonus creates between a worker and his corporation. They're taking care of that concern by offering you a contract.
Now, an employment contract is a funny thing. It feels like a nice development. They want you. They give you a deal. How nice. Except a lot of employment contracts do nothing but tie an employee to the company without really giving him or her anything more than they had in the first place. Sometimes it also has clauses taking away certain rights that you had before, or preventing you from taking another job if you should leave the company before (or even after) its term is out. Worse, some contracts spell out severance deals that supersede existing company policies in the matter. If you've been a long-time worker, you have to be careful that the deal you sign doesn't take away something from you if for some reason you're terminated.
One thing is for sure: You need a lawyer to look at your deal -- and make sure it's a good one. But keep in mind that when a company offers you a contract, they want you to sign it. You can refuse, if you like, but eventually they're going to take it as a statement of loyalty -- or lack thereof. So make sure it addresses all your concerns, and maybe even gives you something extra that you've wanted for a while. Some guys get cars or club memberships built into their deal. Jack Welch got his greens fees paid for, at least for a while. You're probably not going to be so lucky. But get what you can. And then sign it.
One final thing: make sure that, even if you ARE moving to a commission-based structure, you don't go 100 percent commission. You need some kind of guarantee, a draw against commission. Having a job should mean that you know you'll be earning something in good times and bad. Otherwise it's not a job. It's a dangerous hobby. Like bungee jumping.