Commissions, Piece Rate & Bonuses

Rules and regulations about paying by commissions, piece rate, and bonuses

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What does it mean to be paid by:

A commission is a form of payment that is usually a percent of the business’ profit. For example, in a retail store the worker might receive 10 percent of each sale made or may be paid an hourly rate plus 5 percent commission for every sale made.

  • Workers may be paid on a commission basis only, or an hourly/salary plus commission. If paid on a commission basis only, it must equal the current minimum wage for all hours worked in the pay period.
    For example: A beautician in a beauty salon paid by commission only for each hair cut, permanent, etc., worked 80 hours with no overtime hours in the pay period, and earned a total of $400 in commissions. In 2005, the beautician is entitled to $7.35 per hour x 80 hours for a total of $588. The business owes the beautician an additional $188 to equal minimum wage for that pay period.
  • Workers that sell the business’ products or services outside of the business, where they typically go from business to business or customer to customer are known as “outside salespersons” and are not required to receive minimum wage or overtime payments. If the worker worked 110 hours in the pay period and made $200 in commissions, the business is not required to make up the difference to meet the minimum wage law or to pay overtime.
  • Expand/collapse Piece Rate?

    Piece rate payment is usually a price paid per unit of work. For example, in a manufacturing plant, workers are paid 10 cents per widget they make on the production line. The worker is entitled to minimum wage, however. So if the pay per piece does not equal minimum wage for the time it took to create those pieces, the business must make up the difference so the worker gets at least minimum wage for the time worked.

  • Expand/collapse Bonuses?

    Bonus payments are in addition to hourly, salary, commission, or piece rate payments. A bonus is normally given by a business to workers for excellent work or for outstanding production. For example, workers in a manufacturing plant were given a $300 bonus at the end of the year because they made few errors on the production line, and the business made a lot more money than it had expected to make. It is typically a reward for good work but there is no agreement between the employer and workers that they will receive a bonus. This type of bonus is not considered to be part of the worker’s wages and is not required to be included in the overtime calculation.

    Certain bonus payments are paid under an agreement between the employer and  workers. These bonuses are typically paid to the workers every pay day, every quarter, semi-yearly, or yearly, or if the workers have an agreement for bonus payments or if the business led them to believe they would receive a bonus. These types of bonus payments are considered part of the worker’s wages. These bonus payments must be included in the overtime calculation.

  • Questions and answers

  • Expand/collapse May workers be paid by commission or piece rate only, and must those payments equal minimum wage for the hours worked in each pay period?

    Yes. In general commissions and piece rate must equal minimum wage for the hours worked. However, there is an exception for those who sell products or services away from the employer's place of business and are paid commission. This is commonly known as "outside sales."

  • Expand/collapse Is overtime pay required for those paid on a commission or piece rate basis?

    Yes. In general commissions and piece rate must be included in the overtime calculation for the hours worked in each workweek. There is an exception for those who sell products or services away from the employer's place of business and are paid commission. This is commonly known as "outside sales." For more information on how these calculations must be made, contact the nearest L&I office.

  • Expand/collapse If a commission or piece rate has not been paid as agreed between the worker and business, what can the worker do?

If a worker is owed commission or piece rate wages and the employer refuses to pay, the worker may be able to:

  • File a Wage Claim through L&I, OR
  • File a claim in small claims court if the amount is less than $5000, OR
  • File legal action through a private attorney.

For more detail, see these L&I Administrative Policies:
Acrobat PDF file Commissions and Minimum Wage (ES.C.3) (11 KB PDF)
Acrobat PDF file How to Calculate Overtime (ES.A.8.2) (57 KB PDF)

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