Legalities of Commission Based Pay

Looking to go to a commissioned based pay. My accountant seems pretty reluctant. He suggested that employee classification for things like over time, minimum wage requirements and unemployment compensation might get tricky. How have you folks navigated these topics?

Instead of commission, how about a lower base pay with incentives. I have seen it be successful in other businesses. Especially if you can make it team oriented.

With commission you will have to keep track of their hours as well and pay whichever is greater- hourly (minimum wage including ovetime) or the commission rate

My state doesn’t require over time pay if we pay commission. We keep time sheets to track time. And unemployment pay is based on a percentage of gross pay, so not sure why it would matter if the employee was hourly or commission.

Yes, you will need to keep track of hours to ensure at least minimum wage is earned for all hours worked. That means, engaged to work too. Like if your staff shows u at 8am and its raining so you dont start till 9, they should legaly be paid from 8 since you engaged them.

Also, drivetime is important to track as well if you transport your team, or if team members drive together. There are a lot of rules for paying drivetime so id check with your state tax office for information.

I switched to commision in dec last year and love it.

I think it all depends on your local and state laws. Here in IL commission is commission, weather you earned minimum wage or not. I earned commission for F*SH for years before I started my biz, and there were times when I averaged about a dollar below min wage. However, on larger jobs the boss would pay hourly or commission, whichever was lower (which I don’t think was necessarily right).
I don’t have employees, so I don’t have to worry about this for right now.

Minimum wage is a federal law. States can have a higher minimum wage than required by FLSA, but it can not be lower than it.

You have to be paid at least the minimum wage for all hours worked during a single week + overtime…regardless of what state you work in…period. (That’s cash pay, not…you get a company car so that’s worth $200 a month and covers unpaid monies on commission earned less than minimum wage for the hours worked.

There are many exceptions to this rule; but Im confident none of you that posted meet them. (Unless one of you is a 14 year old farm boy with a hard ship drivers license, plucking corn 3 days a week for no more than 2 hours a day)

If your going to hire an employee than you should take some responsibility as a business owner to research the legalities of what you are getting into; instead of asking your friendly neighborhood window cleaner.

And more importantly; if you are an employee you should really learn your rights about fair pay so you don’t get screwed by the naive employers or worse, intentional denied what is rightfully yours.

United States Department of Labor

From what I see, blue collar workers cannot have exempt status and therefore must be paid overtime.

Therefore, overtime pay is determined for commissioned blue collar workers by “dividing the total pay for employment in any workweek by the total number of hours actually worked.” That might be an extra $6.00-$10.00 on top of their commission, NOT time and a half using minimum wage. So instead of $10.88/hr, a commissioned employee would likely make somewhere between $18.00-$30.00/hr for working overtime.

yep, depends on the accounts, sometimes I would be @ 60/hr, other times I’d run all over town doing $15 accounts @ 35%…

as long as your guy isn’t working over 40 and is making a decent check, taxes are paid, mileage is accounted for, and customers are happy it’s a good deal for every one. Not something I’d recommend for an inexperienced employee. (of course)


You can pay hourly minimum wage and add the balance as commission pay, that is how I do it. Dollars earned from percentage pay, minus hourly wages earned, equals commission pay.