DOL Overtime Q&A: Does Commission Pay Count?
DOL Overtime Q&A: Does Commission Pay Count?

DOL Overtime Q&A: Does Commission Pay Count?

With the recently passed overtime rule changes to the Fair Labor Standards Act, employers are likely asking a lot of questions. Which of my employees are newly eligible for overtime? How closely do I really have to track things? And, what about tips, bonuses, and other wages that aren’t part of an employee’s salary but do factor into their annual take-home pay?

These are all great questions, and HR Support Center has the information you need. Take a look at our recent question about commission pay, below, and check out Paycor’s Department of Labor Resource Center to find other answers you need.


_DOL RULES UPDATE
On November 22, a U.S. District ruled in favor of an injunction blocking the final overtime rules from being implemented on December 1, 2016. At this time, we are awaiting more information on updates to the rule and the final implementation date.

If you have implemented changes already, we recommend businesses not change any plans, pay structures, or policies that have been updated._


Question:

We have two currently salaried employees who make about $42,000 per year. However, with commissions, we estimate that they will make $48,000 or more per year. They can still be exempt, right? What happens if their commissions do not exceed the minimum of $47,476 as expected? We’ve double checked the duties test and they both qualify as executives. We’re just worried about the salary threshold.

Answer:

Great questions! This is definitely something employers with commissioned employees will want to keep an eye on. You are correct that if these employees make over $48,000, they can remain exempt. Up to 10% of the minimum salary threshold – $4,747 – may come from non-discretionary bonuses, commissions, or other incentive pay. Your commissioned employees will therefore need to be paid a guaranteed base salary of $42,729.

These incentive payments must be made on at least a quarterly basis, and if the employee does not earn enough of the incentive pay to reach the exempt salary threshold (pro-rated for the quarter, month, or whatever period you’re using), the employer must pay the difference in order to keep the employee’s exemption intact. The DOL calls these “catch-up payments.”

Here’s how these catch-up payments work. Because the annual salary threshold will be $47,476 and incentive pay must be made on a quarterly basis, commissioned employees need to make at least 25% of that amount (or $11,869) in base pay plus commission each quarter. If they make less than that amount per quarter, you'll need to make a catch-up payment to cover the difference.

This payment must be made within one pay period and must only count toward their income during the previous quarter. If you fail to make a sufficient catch-up payment, the employee will be entitled to overtime pay for any overtime hours worked during that quarter.


This content came from a team of HR professionals at HR Support Center. Businesses like yours can pay a yearly fee for HR Support Center and receive awesome subscription perks like these:

* Legal advice

* Employee handbook help (creating a new one or updating an existing one)

* Custom HR forms, letters, tools, and other documents

* Tons of Q&A

* News on government activity that could affect you

* Training on common HR activities like hiring

* Thought leadership articles

The list goes on. HR Support Center is not only feature rich, it’s inexpensive: one entire year of HR Support Center is cheaper than one hour of a typical attorney’s time. Contact us today to sign up.

Listen to Paycor's Need 2 Know Podcast on the DOL Updates

More to Discover

CMS Waives Quality Reporting Requirements Due to COVID-19

CMS Waives Quality Reporting Requirements Due to COVID-19

Many government officials are worried the Coronavirus outbreak will overburden the U.S. healthcare system. In a drastic effort to help healthcare providers focus on patient care rather than paperwork, the Center for Medicare & Medicaid Services (CMS) will waive multiple key quality reporting requirements. What Does CMS Waiving Reports Mean for Healthcare Providers? Q4 Reporting Deadlines Are Now Optional The deadlines for 2019 data submission for the Medicare Shared Savings Program, the Quality Payment Program, and affiliated merit-based incentive program (MIPS) will be extended from March 31 to April 30, 2020. MIPS eligible clinicians who miss the April 30 deadline will qualify for the automatic and uncontrollable circumstances...

How to Make Tax-Free Disaster Payments To Employees

How to Make Tax-Free Disaster Payments To Employees

The pandemic is putting a big strain on everyone, maybe most of all your team, and you want to do everything you can to help.In a national emergency, employers have the freedom to offer unlimited tax-free financial assistance to employees who need it, with minimal administrative burdens. These disaster payments will be exempt from both federal income and employment taxes. What Disaster Payments Cover Disaster payment to affected employees can cover a broad range of “personal, family, living or funeral expenses (not covered by insurance)”. These may include: Unreimbursed Medical Expenses This can range from vitamins and over-the-counter medications to co-pays. Cleaning Products Disinfectant and hand-sanitizer for employee’s homes can help...

Paycheck Protection Program (PPP): What You Need to Know About Payroll Protection

Paycheck Protection Program (PPP): What You Need to Know About Payroll Protection

You need payroll protection. The federal government wants to help. Here’s what you need to know. The Paycheck Protection Program (PPP) As part of the $2 trillion aid package unveiled in the Coronavirus Aid Relief & Economic Security (CARES) Act, $349 billion was dedicated to the Payment Protection Program (PPP). This offers federal guaranteed loans to businesses with fewer than 500 employees to cover payroll and other essential costs.The federal government is focused on releasing funds quickly and with as little red tape as possible, giving small businesses a big boost right when they need it. And here’s the best part—if you use the funds to retain (or rehire) your employees, the loans don’t need to be repaid.View Payroll Protection...

Paycor's COVID-19 Command Center

Paycor's COVID-19 Command Center

We're excited to announce the release of Paycor's COVID-19 Command Center, a new analytics solution that delivers instant insights for crisis management. With the COVID-19 Command Center, you'll be able to: Prepare with real time insights Plan with actionable data Respond with the help of HR experts Recover quickly by playing the long game now Discover how your organization can make the best possible decisions with real time data, actionable insights and expert HR counsel.