slnlaw
  • Home
  • Employment Law
    • Guide To Employment Law Content
    • Employment Contracts in Massachusetts
    • Discrimination in the Workplace
    • Employment Termination >
      • Massachusetts Paid Family Leave
      • Severance Pay
      • Unemployment in Massachusetts
    • Sexual Harassment at Work >
      • Sexual Harassment in a Small Business
      • Sexual Harassment and Non Disclosure Agreements
      • Sexual Harassment and Remote Work
    • Wage and Hour Laws >
      • Overtime Law >
        • Overtime Exemptions
        • Employee Travel Time
        • Federal or State Overtime Law
      • Massachusetts Wage Act >
        • Payment of Commissions
        • Wage Deductions
        • Late Payment of Wages
        • Paid Time Off
    • Independent Contractor Law
    • Non Compete Agreements >
      • Are non competes enforceable
      • Massachusetts Non Compete Act
      • Pre 2018 Massachusetts Non Competes
  • Estate Planning
    • Guide To Estate Planning Content
    • Legacy Protection
    • Why You Need an Estate Plan
    • Why You Don't Have an Estate Plan
    • Estate Planning Documents >
      • Children with Special Needs
    • Planning for Assisted Living
    • Probate Process
  • Business Law
    • Guide To Business Law Content
    • Small Business Law
    • Business Contract Basics
    • Civil Suit Defense
    • Legal Issues for Start Ups
    • Trademark Basics
    • How to Incorporate
    • Sale of Business
  • About
    • Reviews
    • Slnlaw Offices
    • slnlaw core values
    • Publications and Interviews
    • New Client Intake and Consultation
    • Contact
  • Attorneys
    • Emily Smith-Lee >
      • 2018 Lawyer of the Year
    • Jenna Ordway
    • Rebecca Rogers
    • Sharleen Tinnin
    • Elijah Bresley
  • Legal FAQs
    • Estate Planning FAQs
    • Probate FAQs
    • Small Business FAQs
    • Wage Act FAQs
    • Commission Pay FAQs
    • Overtime FAQs
    • Independent Contractor FAQs
    • Non Compete FAQs
    • Employment Discrimination FAQs
    • Employment Termination FAQs
    • Massachusettts Unemployment FAQs
    • Severance Package FAQs
    • Medical Leave FAQs
    • Sexual Harassment FAQs
    • Employer FAQs
    • Civil Lawsuit FAQs
  • Blog

Minimum Wage and Commission Only Employees

Federal and state minimum wage laws apply even if an employee is not paid on an hourly basis. Even if your commission earned over the year exceeds the required hourly rate, you should be paid at least minimum wage for each week worked. You should also know that a recent court decision requires commission-only employees to be paid at least 1.5 times minimum wage for eligible Sunday work.

Calculating the Minimum Wage Rate for Employees Who Are Paid Commissions

If you are a commission only employee, the total amount of your commissions each week divided by hours worked should equal $12.75 per hour in 2020. If you have long sales cycles, you may have periods in which your pay is not compliant with minimum wage laws. For example, if what you are selling typically requires several months of customer cultivation to result in a sale, you could go a month or more without adequate compensation. Even if the ultimate payout is significant when the sale closes, the time you went without compensation might violate the law.

Many employees are paid with a combination of salary and commissions. In this case, in each week your sales commission plus your weekly salary divided by hours worked should equal the minimum hourly rate.

Calculating Hours Worked for Commission Based Employees

​The other challenge for sales employees is that their time is often not tracked. Where compensation is driven by sales made and not hours worked, it can be hard to know whether they work 40 hours a week, 50 hours a week, or some other number.

If you have no other information, you should assume for purposes of minimum wage compliance that your full time employees work 40 hours a week.

For a lot of reasons, however, it is a good idea for employers to find a way to document hours. Your sales employees may claim to work more hours than that. They may claim this entitles them to more compensation in minimum wage. They also may claim they are entitled to 1.5 times their regular rate of pay for overtime. If you do not have a way to prove otherwise, they may be able to make a claim for minimum wage or overtime violations.

Need Help With Unpaid Commissions?

Call (781) 784-2322
OR
Schedule a Free Information Call

Just Looking for Information?

Massachusetts Wage and Hour Free Report
Request Our Free Report

Best Practices for Commission Based Employees

To avoid liability under the minimum wage laws, employers should consider structuring the compensation to guarantee the required hourly rate. One example is to provide a base salary that equals at least $12.75 based on a 40 hour workweek.

Another is to offer a guaranteed draw against commissions. The commission compensated employee would be guaranteed an amount each week that equals minimum wage. That draw can then be offset against future commissions. Be careful, however. The employee must be paid minimum hourly wage in every pay period. This means you cannot offset future commissions if it would bring them below minimum wage.

You also have to be mindful of the rules about deductions and set offs from wages. If you are going to offer a guaranteed draw against commissions, you should consult with an employment lawyer to make sure it is structured lawfully.

Documenting Your Commission Plan

Many commission plans are inadequately documented. This can result in disputes about minimum wage, overtime pay and timely payment of wages. The possibility for confusion is higher because the timing and calculation of payment are often very specific to your business or industry.

If there is a dispute about payment of commissions, the first place a court will look is to the payment terms in your commission plan. If you do not have a written plan, or a plan at all, the court may infer or assume terms that you did not mean to apply.

If you pay employees based on commissions, in whole or in part, it is important to consult with an employment attorney.

How We Can Help

Minimum wage and commissions MA employment lawyers slnlaw
10.0Emily E. Smith-Lee
Commissions and minimum wage in MA employment attorneys slnlaw
We can help you navigate these issues and get clarity on your rights and obligations as an employer or an employee.  You can use the button below to schedule a call back from a member of our team, or give us a call at  781-784-2322.
Schedule a Free Information Call

Sharon MA

46 South Main Street
​Sharon MA 02067

(781) 784-2322
Serving Eastern and Central Massachusetts
Greater Boston Referral Resources
slnlaw solutions
Refer a Friend
slnlaw publications and interviews
​slnlaw privacy policy
Chester MA
26B Main Street
Chester MA 01011
(413) 667-2322
Serving Western Massachusetts
Western MA Referral Resources

Copyright 2022, slnlaw
  • Home
  • Employment Law
    • Guide To Employment Law Content
    • Employment Contracts in Massachusetts
    • Discrimination in the Workplace
    • Employment Termination >
      • Massachusetts Paid Family Leave
      • Severance Pay
      • Unemployment in Massachusetts
    • Sexual Harassment at Work >
      • Sexual Harassment in a Small Business
      • Sexual Harassment and Non Disclosure Agreements
      • Sexual Harassment and Remote Work
    • Wage and Hour Laws >
      • Overtime Law >
        • Overtime Exemptions
        • Employee Travel Time
        • Federal or State Overtime Law
      • Massachusetts Wage Act >
        • Payment of Commissions
        • Wage Deductions
        • Late Payment of Wages
        • Paid Time Off
    • Independent Contractor Law
    • Non Compete Agreements >
      • Are non competes enforceable
      • Massachusetts Non Compete Act
      • Pre 2018 Massachusetts Non Competes
  • Estate Planning
    • Guide To Estate Planning Content
    • Legacy Protection
    • Why You Need an Estate Plan
    • Why You Don't Have an Estate Plan
    • Estate Planning Documents >
      • Children with Special Needs
    • Planning for Assisted Living
    • Probate Process
  • Business Law
    • Guide To Business Law Content
    • Small Business Law
    • Business Contract Basics
    • Civil Suit Defense
    • Legal Issues for Start Ups
    • Trademark Basics
    • How to Incorporate
    • Sale of Business
  • About
    • Reviews
    • Slnlaw Offices
    • slnlaw core values
    • Publications and Interviews
    • New Client Intake and Consultation
    • Contact
  • Attorneys
    • Emily Smith-Lee >
      • 2018 Lawyer of the Year
    • Jenna Ordway
    • Rebecca Rogers
    • Sharleen Tinnin
    • Elijah Bresley
  • Legal FAQs
    • Estate Planning FAQs
    • Probate FAQs
    • Small Business FAQs
    • Wage Act FAQs
    • Commission Pay FAQs
    • Overtime FAQs
    • Independent Contractor FAQs
    • Non Compete FAQs
    • Employment Discrimination FAQs
    • Employment Termination FAQs
    • Massachusettts Unemployment FAQs
    • Severance Package FAQs
    • Medical Leave FAQs
    • Sexual Harassment FAQs
    • Employer FAQs
    • Civil Lawsuit FAQs
  • Blog