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Commission
Practical Law Glossary Item 3-521-1114 (Approx. 3 pages)
Glossary
Commission
For wage and hour purposes, compensation based on the value or quantity of goods or services produced or sold. For example, compensation based on:
- A percentage of total sales.
- A percentage of sales above a specified amount.
- The number of units sold or produced.
For purposes of the securities laws, a commission is a fee paid to a broker, as an agent of the customer, for executing a trade based on the number of bonds traded or the dollar amount of the trade.
Commissions can be:
- Calculated on a daily, weekly, monthly, annual, or other basis.
- Paid weekly, biweekly, annually, or at some other interval.
- An employee's sole source of compensation or combined with other methods of pay, including:
- an hourly rate;
- a guaranteed base salary;
- a non-recoverable draw on commission;
- a recoverable draw; or
- other incentive compensation.
Under the Fair Labor Standards Act (FLSA), commissions are pay for hours worked and must be included in an employee's regular rate for purposes of calculating overtime pay (29 C.F.R. §§ 778.117 to 778.122).
For more information on commissions and commissioned employees, see Practice Note, Sales Exemptions Under the FLSA and Drafting a Commission Sales Plan Checklist.