Website Visitor, Here Are Your Articles for Friday, May 11, 2018
Is this email not displaying correctly?
View it in your browser .
Employer's Choice Solutions
Joni Prose
President
jprose@employerchoice.com
(941) 627-0777
Friend Me on Facebook Follow Me on Twitter Connect with me on LinkedIn
Website
About Us
Customer Reviews
Free Quote
Contact Us
Share Save

Payroll Procedures for Commissioned Employees

 

Commission is a sum of money an employee receives for performing a certain task. This sum is typically a percentage of sales made. While some employees receive only commission, others are paid a commission plus a salary or hourly wage. In some cases, a commissioned employee is exempt from overtime. There's also withholding, paid sick leave and the last paycheck to consider. Let's examine all of these components.

Commission Only

With a commission-only pay structure, payment is based on the agreed-upon commission percentage or rate. For example, a salesperson who sells $40,000 in products per month, with a commission of 10 percent, would receive $4,000 in commission for that month.

Some establishments use a graduated commission scale, such as:

  • Commission of 6 percent for the first $20,000 in sales.
  • Commission of 8 percent for the next $35,000 in sales.
  • Commission of 10 percent for all sales over $35,000.

Commission + Salary or Hourly Wage

Some employees receive a predetermined, or base, salary in addition to commission. If the employee is exempt-salary, he or she must receive no less than the minimum salary requirement under the FLSA or applicable state law — in addition to his or her commission.

Similarly, commissioned, hourly employees must be paid at least the federal or state minimum hourly wage, whichever is more, plus their commission.

Overtime

Commissioned employees who are exempt from the FLSA's overtime pay provisions do not have to be paid overtime if they work more than 40 hours in a week. This includes salaried employees and outside salespersons who perform the FLSA-mandated job duties necessary for exempt status. Note that the FLSA does not have salary or minimum wage requirements for exempt outside salespersons — these employees can be paid on a commission-only basis.

Additionally, commissioned employees in retail establishments are exempt from overtime if they meet certain conditions of the FLSA. One requirement is that over half of the employee's total earnings in a specific period must constitute commissions.

If the commissioned employee is not exempt from overtime, he or she must receive overtime pay for work hours exceeding 40 in a week. Both the commission and the regular wages earned for the week must be factored in when computing overtime.

Withholding

Commissions paid to an employee are considered wages, and they are generally subject to federal and applicable state employment taxes, including federal income tax, Social Security tax and Medicare tax. Employers must pay their own share of taxes on commissions as well. When paid in addition to regular salary or hourly wages, commissions are considered supplemental wages, in which case, special withholding rules may apply.

Paid Sick Leave and Final Wages

In states that mandate paid sick leave, commissioned employees may need to be paid for sick leave, regardless of whether they are paid fully or partially by commission. Also, when a commissioned employee terminates, it is important to check state law for any rules that might apply to handling the final paycheck.

 

 
Share Save

Your Comments

Saved Articles
Comments and Feedback
Refer A Friend
Your Privacy
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
Powered by
Copyright © IndustryNewsletters All rights reserved.

This email was sent to: support@digitaleel.com

Mailing address: 22476 Sacramento Ave, Port Charlotte, FL 33954