What is the Difference Between a Commission and a Bonus?
Because commissions are considered wages under the Massachusetts Wage Act and bonuses are not, it is important to understand the difference. You should also know that it does not matter what label your employer puts on an incentive payment- if it operates like a commission, it will be treated like a commission, even if it is called a bonus.
An incentive payment will be considered a commission under the law if it is based on an employee's individual contribution. The most common example is sales closed- if your payment is based on the number of sales you close, as opposed to the performance of a group or division, that should be considered a commission.
This can also apply outside of sales. People providing professional services may be compensated with a percentage of revenue received from invoicing clients for their services. So long as this is calculated based on individual contributions, it should be considered a commission.
A bonus, in contrast, is generally an amount- discretionary or guaranteed- that is tied to either a subjective performance appraisal, group or division wide performance, and/or company-wide revenue or profit.
Learn more here about commission pay under the Massachusetts Wage Act.
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