Commissioned employee labor laws
Commission pay is the amount of money that an employee gets once they finish a task or service or reach a sales goal for their employer. An employee that works on commission is paid based on the revenue they generate for the business.
When employees work on commission, it’s important to know exactly what they need to accomplish to get their commission. Many times, an employer’s commission policy or agreement is loosely worded in a way that benefits the employer. Employees that work on commission should ask their employer questions to ensure they understand how to obtain a commission and when it will be paid.
A common problem that commissioned employees face is when the employee wants to exit their company and the employer tries to withhold all or a portion of the commission. If you are planning to move jobs, it’s important to know exactly what you could be giving up in commissions when you leave.
How does commission pay work?
In a commission job, the employee gets a percentage of revenue for company sales. Sometimes the employee will also receive a base hourly rate or salaried pay in addition to their commission pay.
Employee commissions are governed by the company’s policy. Usually, there is a commission plan or agreement that controls how much the employee receives in commissions, on what conditions, and when the commission is paid out.
Commission jobs are common in sales and business development roles, where the employee has control over whether customers purchase products or services from the company. Other employees get commissions to encourage them to promote the business and bring in new customers or reach a particular revenue goal.
Do commission-only workers get benefits?
Commission-only workers are usually independent contractors that do not get company benefits. Independent contractors are not employees and file their own taxes using a 1099 tax form, so they are often referred to as 1099’s. It is less common for a commissioned-only worker to be classified as an employee, commonly referred to as a W-2 employee, due to the W-2 tax form filed with the IRS by the employer.
Independent contractors have to obtain their own benefits like health, dental, disability, or other types of insurance. However, there are benefits to being classified as an independent contractor, like more flexibility and control over your schedule and how the work is performed.
Do commissioned employees get paid time off (PTO)?
There is no federal law requiring employers to give employees paid time off (PTO). There are certain state laws that require employers to give PTO to employees, so it depends on where the employee is performing work for their employer.
Usually, an employer will have policies dictating whether employees receive PTO, and generally, the employer will give full-time employees PTO but not part-time employees.
Because many commission-only workers are not employees and are independent contractors, they will not be entitled to PTO. However, if a worker is classified as an employee, receives a portion of their compensation in the form of a commission, and is full-time, most likely that employee will receive PTO as an employer-provided benefit, and state law could provide the employee with additional guaranteed PTO for things like family leave.
Do commissioned employees get paid on Family Medical Leave Act (FMLA) leave?
Generally, Family Medical Leave Act (FMLA) leave is unpaid. However, if a commissioned employee completes all of the required tasks to obtain their commissions, they are likely entitled to commission payments while on FMLA leave.
Employees on FMLA leave are still entitled to receive pay that other employees receive for taking similar leave, such as sick leave. If there is a cost-of-living increase that is provided to all employees, it shouldn’t exclude employees taking FMLA leave.
The purpose of FMLA leave is to allow an employee to take family or medical leave and not have it negatively impact their position or standing within the company. Employees taking FMLA leave should not be retaliated against for taking their leave or punished in any way.
How do you know if you should take a leave of absence?
You should take a leave of absence when an employer’s policy allows for it, and you have exhausted other ways to take time off from work, such as paid time off (PTO) or legally mandated leave, such as FMLA (Family Medical Leave Act) leave.
A leave of absence is a way for employees to take time off of work that is granted by the employer’s leave of absence policy. Paid time off (PTO) is an employer benefit, which usually is accrued by the employee each pay period, given to the employee at the beginning of each year, or provided to the employee as an unlimited PTO benefit, depending on the employer’s policy.
What is a good reason for a leave of absence?
Typical reasons for a leave of absence are an employee’s illness or injury, caring for a family member, childbirth, or military leave.
Whether or not a leave of absence is granted or even allowed will depend on the employer’s policy, the length of time an employee has worked for an employer, whether you have taken a leave of absence already within the recent past, and the specific reasons for the leave of absence.
What is the difference between leave of absence and FMLA?
A leave of absence receives no job protection, while FMLA leave is job-protected leave. When an employee returns from FMLA leave, they are legally required to return to the same or a substantially similar position.
A leave of absence does not have the same level of job protection surrounding it and is granted by the company on a case-by-case basis or in accordance with the company’s policy.
Additionally, FMLA leave is legally mandated for eligible companies, but a leave of absence is not something an employer has to provide. Generally, smaller companies will not have the ability to grant leaves of absence because they don’t have the coverage to do so.
Should I quit my job or take a leave of absence?
It is ultimately your decision whether you quit your job or take a leave of absence, but if you can take a leave of absence, it has multiple benefits.
First, a leave of absence typically allows you to stay on an employer’s health insurance plan. While quitting may still allow you to stay on your employer’s health insurance plan, it will be more expensive than what you are already paying because you will be paying increased health insurance continuation rates until you get on a different plan.
Second, a leave of absence will allow you to have less gaps in your resume. If you quit and do not have another position lined up, you will have a resume gap, which could impact your future employment prospects.
However, if your current job exposes you to a hostile working environment, and taking a leave of absence will not alleviate the current stressors you are under, you may be inclined to quit your job, even if you do not have something lined up. Further, a leave of absence is often unpaid, so quitting your job if you have another job lined up may be a more viable option.
Quitting your job can have downsides. If you decide to quit your job voluntarily, you will not qualify for unemployment benefits through your state. Also, you may not be eligible for rehire at your company, depending on your company’s policies for rehire.
In sum, the decision to take a leave of absence can have many benefits, but ultimately, the decision is yours and should be weighed carefully. If you could benefit from speaking with an experienced Virginia, Maryland, or DC-licensed employee employment attorney, contact the Lipp Law firm today to see if we can assist you with your leave of absence or commission pay situation.
Call Lipp Law
We look forward to serving your needs.