There is a common misconception that if you are paid on a commission basis, you are not entitled to overtime. In fact, one of the primary requirements that must be met for your employer to avoid paying you overtime is that the you be paid on a "salary basis." That means that each pay period you receive a predetermined amount constituting all or part of your compensation and that amount is not subject to reduction because of variations in the quality or quantity of the work you perform. Commissions fluctuate based on performance and are not a salary.
Here is an example of how overtime payments to a commission-based employee might work:
Let's say you make $1,000 in commissions during one week and you worked 45 hours that week. First you must determine your regular rate of pay by dividing your compensation ($1,000) by the number of hours worked (45). This equals $22.22 per hour. The law presumes that you have then been paid your regular rate of $22.22 per hour for 45 hours.&However, for the 5 hours worked over 40, you are entitled to time-and-one-half your regular rate, or an additional $11.11 per hour for each of those 5 hours. So, your total compensation for that week should be $1,055.55.
The bottom line is that employees who are paid on commissions alone are probably entitled to overtime pay.
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