Substantial Modification and Loss of Commission: When to Challenge Changes to Variable salary

The question almost always follows the same pattern. The company changes roles, client portfolios, markets or targets. The fixed salary stays the same. But the commission, bonus or incentive scheme is compromised, and within a few months, actual take-home pay can fall significantly.

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Josep Conesa Sagrera

Employment and insolvency lawyer

Josep Conesa is a Spanish and English-speaking labour lawyer who holds a master’s degree in European law and Fundamental Rights. Over 25 years of esperience. We’d be delighted to legally help you too, in your language whenever possible.

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At that point, a legal tension emerges that lies at the heart of this article. If the employee waits for the loss of variable pay to materialise, the company may argue that the twenty working-day deadline to challenge the modification has already expired. But if they act immediately, some courts may take the view that the future loss of variable pay does not yet constitute sufficient current harm to support a finding of substantial modification of working conditions. That contradiction remains unresolved in current employment case law, and it demands swift, well-grounded decisions.

Article 41 of the Workers' Statute lists the remuneration system and salary level among the matters that may be subject to substantial modification. Where an organisational change foreseeably reduces an employee's capacity to earn commissions, the employer's decision may fall within that scope, even if the fixed salary is left untouched.

When a change of duties may constitute a substantial modification if it affects variable salary

In the video, Josep Conesa and Zaida Álvarez examine in depth the practical case analysed in this article: an internal reorganisation that affected the duties of a long-serving employee and their capacity to earn variable salary. Drawing on this scenario, they explain why certain employer decisions that appear purely organisational may require prior analysis as a substantial modification of working conditions, and as potential age discrimination.

Written by:

Zaida Álvarez

Employment lawyer

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Josep Conesa

employment lawyer

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Can a company change your duties if it reduces your commission earnings?

It can, but there are limits. Where the change materially reduces an employee's ability to earn commission, the employer's decision may fall within the scope of Article 41 of the Workers' Statute, which governs substantial changes to working conditions. The fixed element of the salary does not need to decrease. The impact may arise in relation to the remuneration structure or the actual level of earnings received.

A company has managerial authority and a degree of latitude to reorganise teams, redistribute duties and adjust areas of activity. That latitude is not unlimited. Where an employer's decision materially alters the content of a role and, as a result, the employee's real capacity to earn commission, bonuses or other incentives, the decision must be assessed against the framework of Article 41 of the Workers' Statute.

This includes, among other scenarios:

• reassignment of the client portfolio;
• reallocation to a different territory, market or commercial segment;
• changes to the variable pay plan, targets or bonus scheme;
• setting of targets that are unachievable in the new circumstances;
• transfer to a role with no real commercial activity, commonly referred to as functional hollowing-out;
• reorganisations that isolate an individual from the normal commercial flow.

In all these cases, what matters is not the formal job title. It is the foreseeable economic effect of the change. If the employer's decision significantly reduces the employee's capacity to earn variable pay, it is worth considering whether this constitutes a substantial modification and responding within the legal deadlines. For a general overview of the different types of contractual modifications, see the guide on employment contract modifications.

Article 41 of the Workers' Statute: when a change to variable salary or commissions constitutes a substantial modification

Article 41 of the Workers' Statute expressly includes the remuneration system and salary amount among the matters that may be subject to a substantial modification. This means that not only a direct reduction in fixed salary falls within this provision. Any employer decision that materially alters the remuneration structure, or foreseeably reduces the employee's real capacity to earn commissions, bonuses or incentives, may equally do so.

The provision allows company management to implement substantial modifications where there are demonstrable economic, technical, organisational or production-related grounds. The legislation expressly lists the following matters as capable of forming the subject of a substantial modification:

• working hours;
• schedule and distribution of working time;
• shift work arrangements;
• remuneration system and salary amount;
• work and performance system;
• job functions, where these exceed the limits of functional mobility.

A reassignment of client portfolio, a change of market territory, or an amendment to performance targets may constitute a substantial modification if it significantly affects variable pay, even where the fixed salary remains unchanged at the time.

Future loss of commissions: is that sufficient grounds to challenge a substantial modification?

It may be, where the organisational change allows a material reduction in variable pay to be anticipated and the company cannot demonstrate a proportionate justification. Not every future change to variable pay automatically renders a modification substantial. Nor does it automatically rule that out. The analysis depends on a combination of factors.

It is worth reviewing:

• the weight of the variable component in total remuneration (there is a significant difference between affecting an incidental variable element and one that accounts for thirty-five or forty per cent of total payroll);
• the link between the modified duties and the generation of commissions (the more direct the connection, the greater the risk of the measure being classified as a substantial modification);
• the economic predictability of the loss (whether the organisational change allows a reasonable anticipation of a material reduction in variable pay);
• the documented business justification (whether or not demonstrable economic, technical, organisational or production grounds exist);
• the proportionality of the change relative to that justification.

The greater the weight of the variable component and the clearer the functional connection to its generation, the higher the risk that an organisational change will be classified as a substantial modification. The fact that the economic loss is projected into the future does not rule out the possibility of a legal challenge.

The right question is not whether next month's payslip will be lower. It is whether the change materially alters the employee's ability to generate variable pay, and whether the company can objectively justify the measure.

Changes to portfolio, market or targets: signs that you may lose variable salary

For roles with variable remuneration, there are five or six specific organisational decisions that should raise immediate concern. Nearly all disputes arise through these routes, not through a nominal reduction in base salary.

• Reassignment or loss of client portfolio. A change to the assigned portfolio can have a direct impact on future commissions. What matters is not the formal structure of the role, but the foreseeable economic effect.
• Change of market, territory or commercial segment. If the new market does not allow the employee to generate equivalent commissions, the measure may affect the remuneration structure even if the fixed salary remains unchanged.
• Modification of the variable pay plan. When the company alters the criteria used to calculate variable pay, it is acting on the remuneration system itself. If the change is substantial, it falls within the scope of Article 41 of the Workers' Statute.
• Unachievable targets in the new context. Setting targets that, given the new duties, are realistically unattainable may render the variable component economically meaningless.
• Reassignment to a commercial role with no real commercial activity. Assigning residual, internal, or wind-down management tasks to a sales profile can strip away the employee's ability to earn commission.
• Functional hollowing-out and covert functional reassignment. An apparently lateral reassignment may conceal a hollowing-out of the role if the employee loses responsibilities, team members, or commercial deal flow.

When several of these warning signs apply to the same individual, the legal analysis must be handled with particular care. These situations typically arise where the change is implemented without a formal written notice, meaning the employee must act quickly to preserve their right to challenge it within the applicable time limit.

Functional reassignment or substantial modification: where the line falls when variable pay is affected

The dividing line depends on the real impact on the content of the role and on remuneration, not on the formal label attached to the change. This is why a decision presented as a "lateral reassignment" may, in practice, constitute a substantial modification.

The company has a degree of latitude to reassign functions within the same professional group, provided it respects the employee's dignity, training, job grade, and the limits set by law. The problem arises when a change of duties materially alters the substance of the role, stripping the employee of responsibility, separating them from their team without adequate explanation, relegating them to residual tasks, or directly affecting their pay structure.

In such cases, the company may seek to argue that the change amounts to an ordinary reorganisation. However, if it has a significant impact on functions, salary, variable pay, career progression, or dignity, it may well be argued that it constitutes a substantial modification in reality. The same decision can appear neutral on an organisational chart while being genuinely substantial in terms of the actual role.

Where a reallocation of duties affects the employee's ability to generate commission, meet targets, or earn incentives, the question of whether the change is "lateral" or "substantial" becomes considerably more complex. An apparently neutral redistribution of tasks can amount to a substantial modification if it hollows out the economic substance of the role.

What to do if the company does not issue a formal written notice: burofax and the 20-day time limit

The most prudent course of action is to send a formal recorded letter (burofax) within the first few days of detecting the change. The Supreme Court has consistently held that, where an employee becomes aware of a measure and does not challenge it within the following twenty working days, the limitation period may be deemed to have expired, even if the company has not provided the written notification required under Article 41 of the Workers' Statute.

A suggested timeline to avoid missing the deadline:

• Day 0: The change is detected (reassignment to new functions, accounts or territory).
• Days 1 to 3: Send the formal recorded letter setting out your position and announcing your intention to challenge the measure.
• Days 4 to 15: Gather documentation on the weight of the variable component, commission history, comparison with the rest of the team, and seek legal advice.
• Working day 20: Deadline expires for challenging the substantial modification.

The formal recorded letter should be structured around five key points:

1. Identify the measure in detail: change of functions, accounts, territory, targets, commission structure, or a combination of these.
2. Explain why it affects the remuneration system: the weight of the variable component, its functional connection to how it is generated, and the foreseeable financial loss.
3. Express clear disagreement with the employer's decision.
4. State your intention to challenge the measure under Article 41 of the Workers' Statute.
5. Request the formal written notification required by law, if it has not yet been provided.

The formal recorded letter serves several purposes simultaneously. It documents the moment the employee responds, frames the debate around when the limitation period begins to run, serves as evidence of the employee's objection, and preserves the right to challenge the measure without having to rely on the general one-year prescription period, which, in this context, provides a weaker legal basis.

From an employer's perspective, this scenario underscores a key principle: where a measure is significant, it must be communicated in writing, in full, and in a traceable manner. A well-drafted notification also protects the company, as it frames the debate clearly, establishes when the time limits begin to run, and makes it easier to defend the rationale behind the decision. Under the Labour Courts Procedure Act, the challenge process is urgent and takes priority, with a twenty working-day limitation period running from the date of written notification.

Have your duties changed and are you at risk of losing commission? Act before the deadline passes. The employment team at Conesa Legal can review your situation with you and prepare the formal notification letter with the appropriate legal grounds. Speak with an expert:

 

Real case: change of duties, 35% loss of variable pay, and potential age discrimination

During a advice session with the employment team at Conesa Legal, also discussed in a video, a particularly instructive case was examined, highlighting the risks of a poorly handled substantial modification of working conditions.

The client was an international recruitment manager at a company in the construction sector, with over twenty years at the company. The company decided to dissolve the international department and redeploy the entire commercial team to the domestic division. This employee, who was approaching retirement, was not reassigned along with the rest of the team. Instead, he was given residual responsibility for an already completed international project, limited to handling supplier and client claims relating to a closed contract.

The issue went beyond a simple change of duties. His remuneration structure combined a fixed element and a variable element tied to the new international contracts he managed. By removing him from the activity that generated those commissions and placing him on a project with no ongoing commercial activity, the change entailed a foreseeable future loss of more than thirty-five per cent of his variable pay.

The company did not provide written notice complying with Article 41 of the Workers' Statute. As a result, the first procedural step was to send a formal recorded letter (burofax) setting out the employee's position and announcing his intention to challenge the decision. A claim was then built around three grounds:

• challenge to the substantial modification of working conditions under Article 41 of the Workers' Statute;
• action for compensated termination of contract under Article 50.1.a and 50.1.c of the Workers' Statute, on grounds of employer breach and harm to dignity;
• protection of fundamental rights on the basis of potential age discrimination, and a claim for damages.

The court of first instance ruled in favour of the employee. It acknowledged the impact on the remuneration structure, the absence of a formal procedure, and relevant factors connected to the employee's age and proximity to retirement. After eight hours of proceedings, the ruling awarded the full amount of damages claimed for the infringement of fundamental rights, in this case, eighty thousand euros, in a detailed, well-reasoned decision that addressed each issue raised and found in our client's favour.

Subsequently, the ruling of the High Court of Justice hearing the appeal took a turn as significant as it was unexpected, given the meticulous assessment of evidence carried out by the court of first instance: it held that the reassignment amounted to a horizontal transfer despite the future loss of the variable pay component, that such loss had not been established as current damage, and that accordingly it could not support a finding of substantial modification. The case remained pending a cassation appeal before the Supreme Court.

This case should be read as a practical illustration, not as an automatic rule applicable to every situation. Its value lies in highlighting the procedural complexity of variable salary disputes and the importance of building a robust strategy from the outset.

Age discrimination: when a reorganisation sidelines an employee approaching retirement

An apparently neutral reorganisation may be discriminatory if it disproportionately affects an individual on grounds of age or proximity to retirement. This is a risk worth identifying early, both for the employee and for the company.

Some indicators that may give rise to a suspicion of age discrimination:

• being the only employee on the team removed from commercial activity, while colleagues are reassigned without issue;
• the change coinciding with proximity to retirement;
• being moved to residual tasks or a closed project with no real continuity;
• receiving no objective explanation for why the measure was applied to that particular individual rather than to others on the same team.

Law 15/2022, Spain's comprehensive equality of treatment and non-discrimination act, strengthens the anti-discrimination framework applicable in the employment sphere. Where reasonable indications exist, the company must demonstrate an objective, reasonable and proportionate justification for its decision. Prior documentation and the internal coherence of the measure are critical. Without such justification, the measure may be declared null and void, and may give rise to an additional claim for moral damages or infringement of fundamental rights.

Age discrimination: when a reorganisation sidelines an employee approaching retirement

In the absence of a unifying ruling from the Supreme Court, the High Courts of Justice remain divided on whether the future loss of variable pay is, on its own, sufficient to sustain a claim of substantial modification of working conditions. This is currently one of the most contested issues surrounding Article 41 of the Workers' Statute.

The typical scenario is straightforward. The company changes the functions, client portfolio, market or targets of an employee whose remuneration includes a variable component. The fixed salary remains unchanged. The variable pay accrued at the time of the hearing may not yet have fallen, but the new circumstances make a significant reduction in the coming months reasonably foreseeable.

In the case analysed and discussed on video by the Conesa Legal employment law team:

• The High Court of Justice of Catalonia, in the ruling resolving the appeal, took a significant turn from the first-instance decision. It held that the future loss of variable pay, standing alone and without evidence of current harm, was not sufficient to support a finding of substantial modification.
• In another ruling, in an analogous case, the High Court of Justice of Andalusia appears, based on the procedural strategy explained in the video, to have adopted the opposite approach, accepting that a reasonably foreseeable future loss of variable pay can sustain a finding of substantial modification.

It is important to frame this as an open jurisprudential debate, not an established doctrine. In the absence of a unifying decision from the Supreme Court, conflicting approaches coexist across different High Courts of Justice. For an analysis of judicial review standards in relation to collective modifications, see the commentary on the case law on collective modification of working conditions.

In each case, it is prudent to:

• act within the twenty working-day time limit;
• document the weight of the variable component, its historical accrual record and the foreseeable loss arising from the change;
• pursue in parallel, where applicable, an action for indemnified termination under Article 50 of the Workers' Statute, to avoid being barred by limitation periods if the tribunal ultimately requires proof of current harm.

The 2025 reform tightening the admissibility requirements for labour law cassation appeals has further raised the bar, making it all the more important to build a robust procedural strategy from the outset.

Articles 41 and 50 of the Workers' Statute: challenging the measure or claiming compensated contract termination

Where an employee has significant seniority or a substantial variable pay component, it is advisable to pursue simultaneously a challenge under Article 41 of the Workers' Statute and a compensated termination claim under Articles 50.1.a and 50.1.c of the Workers' Statute. A single-track procedural strategy leaves the employee exposed to a time-bar risk if the future financial loss is not accepted as a current, actionable harm.

The Article 50.1.a of the Workers' Statute allows for contract termination where substantial changes to working conditions have been made without following the procedure required by Article 41 and those changes result in harm to the employee's dignity. Article 50.1.c of the Workers' Statute allows termination on grounds of any other serious breach of obligations by the employer. In both cases, the compensation payable is equivalent to that for unfair dismissal.

The dual-track approach allows the following to be raised within a single set of proceedings:

• a challenge to the substantial modification under Article 41 of the Workers' Statute, seeking a declaration that it is unjustified or null and void, and reinstatement of the previous terms and conditions;
• compensated termination of the contract under Articles 50.1.a and 50.1.c of the Workers' Statute, where the conditions of harm to dignity or serious breach are met;
• protection of fundamental rights and a claim for damages where there is well-founded evidence of discrimination or a violation of fundamental rights.

This strategy is particularly useful where variable pay represents a significant portion of total remuneration. In such cases, the compensation under Article 41.3 of the Workers' Statute (twenty days' pay per year of service, capped at nine monthly payments) may fall well short of the actual financial loss suffered. The Article 50 route can provide compensation more closely aligned with the real harm.

What the company must justify before changing roles, targets or commission structures

Before notifying any modification, the company should document at least six elements: the reason for the change, its impact, the weight of the variable component, alternatives considered, internal consistency, and an audit trail. A well-documented measure has a realistic prospect of withstanding a legal challenge. A measure implemented without a proper file is unlikely to survive scrutiny at trial.

Specifically:

• the specific ground justifying the measure (economic, technical, organisational or production-related);
• the actual impact on the workforce and, in particular, on the affected individual;
• an assessment of the weight of the variable component within total remuneration and the foreseeable loss resulting from the change;
• the less harmful alternatives that were considered and the reasons why they were ruled out;
• the consistency of the treatment applied to the affected individual compared to the rest of the team;
• the traceability of the communication carried out (letter under Article 41 of the Workers' Statute, effective date, minimum fifteen days' notice, delivery to employee representatives).

Where the condition to be modified is provided for in a statutory collective bargaining agreement, the appropriate route may not be Article 41 of the Workers' Statute but rather Article 82.3 of the Workers' Statute (opt-out or disapplication of the collective agreement). For a more detailed discussion of this point, please refer to the page on collective bargaining over working conditions.

Where the measure may affect employees approaching retirement, on sick leave, with recognised work-life balance arrangements, or in any other situation warranting special protection, a reinforced justification is essential.

What the employee can claim if they lose variable salary following a change of role

The employee may accept the measure, challenge it, rescind the contract under Article 41.3 of the Workers' Statute, or pursue a compensated termination under Article 50 of the Workers' Statute together with a claim for breach of fundamental rights. The appropriate course of action depends on the specific circumstances, the weight of the variable component, length of service, whether or not the formal procedure was followed, and the evidence available.

In detail:

• Accept the measure and continue working under the new conditions, without prejudice to future action should the situation deteriorate.
• Challenge the decision before the employment jurisdiction within twenty working days of written notification. If the ruling finds the measure unjustified, the employee is entitled to be reinstated on the previous terms and to claim damages for the period during which the measure was in effect. If the ruling declares the measure null and void, it ceases to have effect.
• Opt for rescission of the contract with the statutory compensation provided under Article 41.3 of the Workers' Statute (twenty days' salary per year of service, up to a maximum of nine monthly payments) where the conditions set out in Article 41.1 of the Workers' Statute are met and the modification is detrimental to the employee.
• Simultaneously pursuing a compensated termination of contract under Articles 50.1.a and 50.1.c of the Workers' Statute, where the modification was carried out without following the procedure required by Article 41 and causes harm to the employee's dignity, or where there is another serious breach by the employer. In such cases, the compensation may be equivalent to that for unfair dismissal.
• Claiming damages for breach of fundamental rights if the measure conceals discrimination on grounds of age or any other protected characteristic.

Time limits work against you. That is why it is essential to seek advice from the very outset.

Frequently asked questions on substantial modification, variable salary and loss of commission

Can a change to a client portfolio constitute a substantial modification?

It can, where the new portfolio has a clearly lower commission-generating potential than the previous one and the change is not justified by verifiable objective grounds. What matters is not the job title, but the foreseeable economic impact on commission earnings.

Can the future loss of commissions support a challenge to a substantial modification?

This remains a contested issue. Some High Courts of Justice have accepted, in specific cases, that the foreseeable future loss of variable pay supports a finding of substantial modification. Others, including the Catalonia ruling discussed in the video, have required proof of actual, present loss. In the absence of a definitive ruling from the Supreme Court, each case must be assessed carefully, taking into account the weight of the variable component, its functional link to how it is generated, and the economic foreseeability of the loss.

What should I do if the company changes my role without issuing a formal letter?

The most prudent course of action is to send a recorded delivery letter (burofax) within the first few days, identifying the measure, stating your objection, announcing your intention to challenge it, and requesting the formal written notice required under Article 41 of the Workers' Statute. The burofax creates a documented record of your response and preserves the time limit.

Do I still have twenty days even if the company has not notified me in writing?

The statutory twenty working-day period runs from written notification. Where no letter has been issued, there may be a dispute as to when time begins to run, however, the Supreme Court has established that where the employee is aware of the measure and fails to act, the time limit may nonetheless be deemed to have expired. For this reason, it is advisable to act as though the twenty days are already running and to document this with a burofax.

Can I send a formal recorded letter before filing a claim?

Yes, and this is usually the most prudent course of action when the company implements the change without issuing the written notice required under Article 41 of the Workers' Statute. A formal recorded letter (burofax) establishes the employee's position on record, clarifies the relevant deadlines, and serves as evidence of both the disagreement and the intention to challenge the measure.

What is the difference between functional mobility and a substantial modification?

Functional mobility allows the company to reassign tasks within the same professional group, provided the employee's dignity, training and job category are respected. A substantial modification comes into play when the change materially alters the content of the role, for example, by hollowing out responsibilities, separating the employee from their team, reassigning them to peripheral tasks, or directly affecting their remuneration structure. The dividing line depends on the real-world impact of the change, not on the label applied to it.

Can I request termination of my contract under Article 50 of the Workers' Statute?

This route is available where a substantial modification has been imposed without compliance with Article 41 of the Workers' Statute and results in harm to the employee's dignity (Article 50.1.a), or where another serious breach by the employer is present (Article 50.1.c). The compensation awarded is equivalent to that for unfair dismissal. Where the relevant conditions are met, it is advisable to pursue this avenue alongside a formal challenge to the modification.

Can proximity to retirement age be an indicator of age discrimination?

It can be, where an apparently neutral reorganisation disproportionately affects a particular individual on account of their age or proximity to retirement, especially if the company is unable to provide an objective, reasonable and proportionate justification for why the measure was applied to that specific person and not to others in the same team.

What evidence do I need to demonstrate loss of variable pay?

It is advisable to gather the employment contract, the variable remuneration plan, the assigned sales targets, the history of variable pay accrued over recent years, the client portfolio assigned before and after the change, any emails or communications relating to the new functional assignment, and any document that allows the foreseeable loss to be quantified. The stronger the historical record and the clearer the functional link, the greater the evidential weight.

What must the company justify when changing my targets or commission structure?

The company must demonstrate the economic, technical, organisational or production-related grounds underpinning the decision, the foreseeable impact on remuneration, the less detrimental alternatives that were considered, and whether the affected employee has been treated consistently with the rest of the team. The greater the impact on variable pay, the more demanding the standard of justification.

Employment lawyers for challenging a substantial modification involving loss of variable salary

When a business reorganisation reduces responsibilities, strips a portfolio, changes targets or shifts a sales professional away from their usual activities, the decision about how to respond, or how to implement the measure, determines the outcome.

At Conesa Legal we support employees in challenging changes that affect their variable salary or commission arrangements, in preparing the formal written notice (burofax), in drafting the claim, and in pursuing the dual-track strategy under Article 41 and Article 50 of the Workers' Statute where the conditions are met. We also advise employers on the design and documentation of substantial modifications where genuine grounds exist and the measure needs to be implemented with legal certainty.

The critical moment is not the hearing. It is the period immediately after the change: identifying the measure, setting out your position in writing, preserving the deadline, and building the procedural strategy before the twenty-day window closes.

Contact our employment team to review your case: