You’re here because you want to understand commission-based pay laws. Perfect! We’re diving into the four key aspects you need to know.
We’ll explore how your job role affects your earnings, how minimum wage laws intersect with your commission, the rules of overtime pay, and the minimum salary requirements for exempt employees.
By the end, you’ll have a firm grip on these laws, enabling you to make smarter career and financial decisions.
1. Commission-Based Pay Laws apply to both exempt and non-exempt employees.
How do commission-based pay laws apply to you, whether you’re an exempt or non-exempt worker?
If you’re an exempt worker, you’re typically shielded from laws related to minimum wage and overtime pay. However, you must still earn a minimum salary, which can include commissions. If your commissions fall short of the minimum salary requirement, your employer is obligated to make up the difference.
Now, if you’re a non-exempt worker, you’re entitled to minimum wage and overtime pay. Your commission earnings must at least equal the federal minimum wage of $7.25 per hour, or your state’s minimum wage if it’s higher. For overtime, you’re due 1.5 times your regular pay for hours worked beyond 40 in a workweek.
These laws ensure you’re properly compensated, regardless of your exemption status.
2. Non-exempt employees are still guaranteed a minimum wage
If you’re a non-exempt employee on commission, you’re still entitled to earn at least the federal or state minimum wage, whichever is higher. This means, that even if your commission doesn’t meet the minimum wage, your employer has to make up the difference. This is a crucial protection provided by the Fair Labor Standards Act.
It’s essential to know your rights and ensure you’re receiving the correct pay. Even though your pay structure may be based on the sale of goods or services, it doesn’t exempt you from basic wage protections. The bottom line? The commission doesn’t override your right to a minimum wage.
3. Non-exempt employees are eligible for overtime pay.
Continuing with your rights as a non-exempt employee, remember that you’re also entitled to receive overtime pay for any hours worked beyond the standard 40 in a workweek. This rule is mandated by the Federal Fair Labor Standards Act (FLSA) and some state labor laws.
The overtime rate is typically 1.5 times your regular pay rate. For instance, if you’re paid $10 per hour and work 45 hours in a week, you’d get $15 (1.5 times $10) for each of the five overtime hours.
4. Your exemption status may determine eligibility for a minimum salary.
In your role as an exempt employee, you may be entitled to a minimum salary, depending on the nature of your exemptions. This means, that even if you’re paid on a commission basis, your employer must ensure you’re paid at least the minimum salary. This is a crucial factor that you need to consider while negotiating your pay structure.
Here’s a brief comparison of minimum salary requirements for exempt employees:
| State | Minimum Weekly Salary (2024) | Other Requirement |
|---|---|---|
|
Federal |
$684 |
Specific job duties |
|
California |
$1,280 |
Same as Federal |
Is it possible for commissioned employees to be paid on a commission-only basis?
You might be wondering whether it’s legal for employees to receive pay solely from commissions. The answer is yes but with some conditions.
Both exempt and non-exempt employees can be paid through commissions. However, non-exempt employees must still receive at least the federal minimum wage. If their commission pay doesn’t meet this, their employer must make up the difference.
Furthermore, non-exempt workers are also entitled to overtime pay for any hours worked beyond the standard 40 per week.
For exempt employees, there are certain job duties and salary conditions to meet, but outside sales employees fall under a special exemption.
Hence, while commission-only pay is possible, it must adhere to federal and state wage laws.
Are there specific types of commission-based pay models?
Let’s explore the three main types of commission-based pay you might encounter in the workplace.
Firstly, there’s straight commission, where your entire income relies on the sales you make. This type is common in real estate and car sales.
Secondly, there’s salary plus commission, offering a base salary with additional income from sales. This provides a safety net, ensuring you earn at least a minimum wage.
Lastly, there’s variable commission. It increases as you achieve higher sales tiers. This model can incentivize increased performance.
Understanding these commission structures can help you negotiate your pay. Remember, commission-based pay can vary by industry, role, and company. It’s important to clarify the specifics with your employer.
What happens to my commission payments if I get terminated?
Should you find yourself terminated, it’s crucial to understand how this impacts your commission payments. Here are four key points:
- Earned Commissions: Any commissions earned while you were employed are generally still owed to you, even after termination.
- Pending Commissions: If a sale was completed but the commission is pending, you may still be entitled to this pay. It will depend on your employment contract and state laws.
- Draw Against Commissions: If your compensation included a draw against future commissions, you may need to repay this amount upon termination.
- Employment Contract: Always review your employment contract. It should outline terms for commission payments upon termination. If it doesn’t, or if it’s not clear, consult legal counsel.
Conclusion
Understanding commission-based pay laws is crucial for your financial well-being. Know that both exempt and non-exempt workers can earn commissions. If you’re non-exempt, you’re entitled to minimum wage and overtime pay. Depending on your exemption status, a minimum salary might apply.
Various types of commission-based pay exist and even if terminated, you may still get your commission. Stay informed and proactive to navigate successfully through the complexities of these laws.
