Labor Laws Regarding Commission Only Jobs

• Employers who pay commission must follow specific U.S. Department of Labor rules and regulations.sales manager checking the sales image by Peter Baxter from Fotolia.com
  
  Commission-only payment is money paid to sales people instead of a wage or salary. Some employers use commission-only payment to encourage employee productivity. Essentially, the employee gets paid only when he or she makes a certain amount of sales. Commissioned employees benefit from specified regulations through the U.S. Department of Labor.
  
  

Minimum Wage

• Employers must pay commission-only employees at least the minimum wage.
  
  

Overtime

• Employees who are paid commission-only are entitled to receive time and a half in overtime pay for hours worked beyond a 40-hour workweek. The Fair Labor Standards Act provides an exemption for employers who are considered to be retail and service establishments. For an employer to fall into this category, 75 percent of the annual dollar volume of the sales of goods or services must come from sales that are not resales. Also, the sales of goods or services (or both) must be recognized as retail sales in the particular industry.
  
  

Exemptions

• Certain exemptions excuse employers from paying their commissioned employees for overtime. Employers must meet three stipulations to be exempt: the employer must be a retail or service establishment, the employee rate of pay must be more than one and one-half times the applicable minimum wage for every hour worked in a workweek, and more than half of the employee's total earnings during a specified time period must be from commission. Unless all three stipulations are met, the employer can't be exempt from the overtime regulation.