There are many ways to structure an employee’s earning. Some employers and employees favor a straight-out salary. Others prefer to include, or base compensation entirely, on incentives such as commissions. This is far more common in certain industries and roles than others. Commissions are a big part of most sales jobs, for example.
What does each party need to bear in mind regarding commissions?
Does the minimum wage apply?
Minimum wage and overtime requirements do not apply to everyone. Some employees and a few employers are exempt from these legal minimums. One relevant example is ‘outside sales staff’. Generally, this means someone who is out on the road making sales calls rather than pursuing them from a company office.
Their earnings could be based entirely on commissions and other incentives, and there is no requirement for them to make the minimum wage, nor for employers to pay them extra if they work above and beyond their usual amount.
Both parties need to be clear on the commission structure
Employees need to know how their employer will work their commissions out, when they will pay them and what, if anything, could cause them to lose their entitlement to them. For instance, if a salesperson leaves having done most of the hard work, but before a sale is closed, would they still get something?
Whether you are an employer or employee, getting legal advice may be wise if a disagreement has arisen over commissions. Early legal intervention can help resolve the situation before it becomes a major problem.