Wages and Hours Worked:

Commissions


OVERVIEW

Commissions and the Minimum Wage:

Under the Fair Labor Standards Act (FLSA), employees covered by the Act who are paid on commission must be paid at least the minimum wage, just as employees who are paid by the hour or piece.

Commissions and Overtime:

Under the FLSA, employees covered by the Act must receive overtime pay for hours worked in excess of 40 hours in a workweek at a rate of at least one and one-half times their regular rate of pay. Their "regular rate of pay" includes commissions.

FLSA, Section 7(i), exempts certain employees of retail and service establishments who are paid on a commission basis in whole or part from the FLSA's overtime pay regulations. There are two requirements for a business to be considered a "retail or service establishment":

  1. Seventy-five percent (75%) of the annual dollar volume of the sales of goods or services (or of both) come from sales that are not resale; and
  2. The sales of goods or services (or of both) are recognized as retail sales in the particular industry.

If a retail or service employer wants to use the Section 7(i) overtime exemption for commissioned employees, three conditions must be met:

  1. The employee must be employed by a retail or service establishment; and
  2. The employee's regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek; and
  3. More than half the employee's total earnings in a representative period must consist of commissions on goods or services.

Unless all three conditions are met, the Section 7(i) exemption is not applicable, and overtime pay must be paid for all hours worked over 40 in a workweek at one and one-half the regular rate of pay, which includes commissions.

COMPLIANCE ASSISTANCE MATERIALS

BASIC INFORMATION

FACT SHEETS

E-TOOLS

RECORDKEEPING

Every covered employer must keep certain records for each non-exempt worker. The Fair Labor Standards Act (FLSA) requires no particular form for the records, but does require that the records include certain identifying information about the employee and data about the hours worked and the wages earned. For a listing of the basic records that an employer must maintain, see the FLSA recordkeeping fact sheet.

APPLICABLE LAWS AND REGULATIONS

RELATED TOPICS AND LINKS

  • State Labor Offices - When the state laws differ from the federal Fair Labor Standards Act (FLSA), an employer must comply with the standard most protective to employees.

  • State Labor Laws

DOL CONTACTS*

  • Employment Standards Administration (ESA)
    Wage and Hour Division
    200 Constitution Avenue, NW
    Room S-3502
    Washington, DC 20210
    Contact WHD
    Tel: 1-866-4USWAGE (1-866-487-9243)
    TTY: 1-877-889-5627
    Local Offices

  • For questions on other DOL laws,
    please call DOL's Toll-Free Help Line at 1-866-4-USA-DOL. Live assistance is available in English and Spanish, Monday through Friday from 8:00 a.m. to 8:00 p.m. Eastern Time. Additional service is available in more than 140 languages through a translation service.
    Tel: 1-866-4-USA-DOL
    TTY: 1-877-889-5627

*Pursuant to the U.S. Department of Labor's Confidentiality Protocol for Compliance Assistance Inquiries, information provided by a telephone caller will be kept confidential within the bounds of the law. Compliance assistance inquiries will not trigger an inspection, audit, investigation, etc.