Commission calculator

How commission and its overtime are worked out

Commission = sales × rate (or the tier or quota rule)
Weekly share = commission for the period ÷ workweeks it covers
Extra overtime = overtime hours × (weekly share ÷ that week's hours) × 0.5

Commissions count in the regular rate for overtime, whether they are the only pay or paid on top of a salary or hourly rate, and however often they are paid (29 CFR 778.117). A commission paid monthly is spread back over the workweeks it was earned in, and each week with overtime gets half of the commission's hourly share times that week's overtime hours (29 CFR 778.119, 778.120).

For a monthly commission the weekly share is the amount times 12 divided by 52, for twice a month it is times 24 divided by 52, and for every few workweeks it is the amount divided by the number of weeks (29 CFR 778.120). The calculator also offers the per-hour method in 778.120(b), with one hourly share for the whole period. This tool keeps full precision. Equal per week rounds each week's amount to the cent; equal per hour rounds the period total once, so results can differ by a few cents from worked examples that round each step.

The overtime figure applies only to a covered, nonexempt employee under the federal Fair Labor Standards Act. It does not apply state overtime rules, such as daily overtime, which can add more.

Outside sales employees, who make sales mainly away from the employer's place of business, are exempt from federal overtime (29 CFR 541.500), and so are some other salaried roles. For them this overtime figure does not apply.

Some commission employees of retail or service businesses are exempt from federal overtime under section 7(i) of the FLSA. It applies in a workweek only when the regular rate that week is more than one and one-half times the federal minimum wage (more than $10.875 an hour at $7.25), and more than half of the employee's pay over a representative period of at least one month is commissions (29 U.S.C. 207(i)). This calculator does not test for it, and state law can still require overtime.

Worked example: a commission over four weeks

The regulation's own case: $384 of commission earned over four workweeks of 44, 40, 44 and 48 hours (29 CFR 778.120(a)). The weekly share is $384 ÷ 4 = $96.00.

The calculator takes one normal week and one other kind of week, so this case, which has three different week lengths, is worked here the way the regulation works it.

Worked example: hourly pay plus a weekly commission

An employee paid $12.00 an hour works 45 hours and earns $135.00 in commission that week (29 CFR 778.118). This is the calculator's example.

Tiers, quotas and draws

Tiered plans work in two ways: each rate applies only to sales inside its band, or the top rate reached applies to all sales. Pick the one your plan uses.

Sales exactly at a tier limit fall in the lower band. Plans differ at the limit, so check yours. A quota plan pays the rate only on sales above the quota: 8% on $26,500 of sales with a $20,000 quota is $520.00.

A draw is an advance against commissions. Whether a shortfall is carried forward and taken back later depends on the plan and on state law, which limits deductions from pay. Federal law still requires at least the minimum wage and any overtime due for every workweek.

Questions

Sources

1. 29 CFR 778.117, Commission payments, general (eCFR)
2. 29 CFR 778.118, Commission paid on a workweek basis (eCFR)
3. 29 CFR 778.119, Deferred commission payments, general rules (eCFR)
4. 29 CFR 778.120, Deferred commission payments not identifiable as earned in particular workweeks (eCFR)
5. 29 CFR 778.121, Commission payments, delayed credits and debits (eCFR)
6. 29 CFR 541.500, General rule for outside sales employees (eCFR)
7. 29 CFR 779.410 to 779.421, Commission employees of retail or service establishments (eCFR)
8. 29 U.S.C. 207(i), Commission employees of retail or service establishments (Cornell LII)
9. 29 U.S.C. 206, Minimum wage (Cornell LII)

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