What Employees Paid on Commission Need to Know About Overtime Pay

Posted on behalf of Peter T. Nicholl in Unpaid Overtime Aug 23, 2021

darkened room with clock on keyboardMost employees are paid a set rate by the hour. However, some employers would rather pay their employees on commission or on a piece-rate basis. The hope is this motivates employees to work harder so they can earn more money.

However, employees need to know they are not automatically exempt from overtime just because they are being paid based on the work they complete. You are not exempt from overtime law unless you fit certain criteria.

If you have been wrongly denied overtime pay, The Law Offices of Peter T. Nicholl may be able to help you recover the wages you are owed. An initial consultation is free of charge and there is no obligation to take legal action after meeting with one of our licensed unpaid overtime attorneys.  

Commission and Piece-Rate Pay

According to the Department of Labor, a commission is an amount of money that is paid to an employee after completing a job. That job is usually selling a certain number of goods or services. Sometimes a commission is paid in addition to a salary and other times workers are only paid on commission.

Some employers pay flat commissions while others pay ramped commissions. A flat commission is a set percentage on any sale made. For example, the employee might receive five percent of a sale. Ramped commission means an employee is paid a rising percentage as he or she hits certain targets set by the employer.

Piece-rate pay is similar to commission-based pay, except piece-rate workers are paid based on the units they produce. For example, warehouse workers who unload trucks might be paid on a piece-rate basis based on the number and types of trucks they unloaded.

There are obvious benefits to commission and piece-rate pay. Employees have added motivation to work harder because they can earn more money. Piece-rate employees and commission-based employees may have greater flexibility with their hours, as employers simply want workers to hit their daily or weekly quotas.

What to Know About Overtime Exemptions

Sales employees who are paid on commission are only exempt from overtime pay requirements if they fit three criteria:

  • They are employed at a retail or service establishment
  • Their regular rate of pay is more than one and one-half times the minimum wage for every hour that was worked in the workweek
  • More than 50 percent of the employee’s total earnings are from commissions

There is also an outside sales exemption for employees who are paid on commission. You may be eligible for this exemption if your job fits two criteria:

  • Your primary job is making sales or obtaining orders or contracts for services or the use of facilities for which consideration will be paid by the client or customer
  • You must be regularly engaged away from your employer’s place of business

If your job does not fit one of those exemptions, you should be paid for overtime hours at the required rate of pay.

There is no specific overtime exemption for employees paid on a piece-rate basis. Unless your job fits another overtime exemption, you must be paid at the required rate for overtime hours worked.

Keep in mind your job title alone does not make you exempt from overtime pay requirements, no matter what your employer may have led you to believe. Exemptions are based on the work employees do, rate of pay and other factors.

Employers are often looking for any way to get out of overtime pay. They are counting on employees to simply believe what their employers say about overtime exemptions.

The burden of complying with federal wage laws is on your employer. It is up to them to track hours worked and make sure employees are paid at the correct rate for overtime pay.

That said, if you think you are being denied overtime pay, you may want to keep your own records, as your employer may be doing a poor job of record keeping.

Call an Experienced Attorney Today for Assistance

Our firm has been helping employees recover unpaid wages for decades. We have extensive knowledge of minimum wage and overtime laws and how to pursue unpaid wages.

Learn more about how we may be able to assist you by calling us to schedule your free consultation. Employers need to be held accountable for wage theft to help prevent it from happening to other employees. 

Contact our personal injury lawyers for a free consultation if you have been injured by another’s negligence. You may be entitled to compensation.



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