Does The Overtime Exemption Apply To Inside Sales?

Most companies are aware of the “outside sales” exemption to the requirement to pay overtime, but they may not be aware that the Fair Labor Standards Act also provides an exemption to overtime for some “inside sales” employees. When an employee sells a big ticket item, the inside employee exemption is used, providing it meets the following three conditions.

The retail business or service employing the individual must be recognized as an establishment in which 75% or more of the annual dollar amount of sales are retail sales in the retail or service industry represented, and are not for resale.
The regular rate of employee pay must be greater than one and one-half times minimum wage for each hour the employee worked during a week when overtime hours are worked.
The total earnings of the employee must consist of more than 50% in commissions earned.

All three conditions must be met for the exemption to apply, and if the employee worked over 40 hours, he or she must be paid overtime wages.

Regular Rate Calculations

Meeting the rate of one and one-half times the minimum wage is less restrictive for the employer than the normal overtime requirement. To determine if the criterion is met, divide the number of hours worked into the employee’s total earnings, which include commission, a draw on future commissions, and any supplemental payments to increase employee earnings to the required level.

Hotels, motels, and restaurants imposing mandatory charges on customers, which are paid to employees in part or in full, may
count the payment as a commission. This allowance is made due to the direct relationship to the goods and services sold by the establishment and applies to a precise percentage of the consumer’s bill. The tips customers give employees are not to be considered commissions.

There is no requirement to calculate the regular rate every week when an employee’s earnings are consistently one and one-half times the minimum wage in a week when the employee worked over 40 hours. When there is uncertainty about an employee’s earnings in some weeks, it is necessary to calculate the regular rate. When there is a question pertaining to the hourly rate, the Wage and Hour Division will evaluate the facts and determine if the regular rate requirement is being met.

Representative Period

When measuring a representative period for commissions, the time used can be as short as a month and no longer than a year. The representative period of time must be defined in your records, and failure to designate the time period is a direct violation of the record-keeping requirement and can be grounds for the exemption being denied.

If there is reasonable expectation that there will be no difference in compensation when compared to other members of the sales group, a newly hired employee may be treated as meeting the exemption from the beginning of employment.

Commission Payments

If the employee is paid entirely by commission or the commission payments are always greater than salary or hourly wages, it is determined that more than half of the employee’s earnings come from commissions. When this is not the case, the commissions and other compensations during the representative period must be totaled separately. Commission totals must exceed other compensation totals in order to qualify for the exemption. If a department or store manager is paid commissions based on sales, the payments can count as commissions. Although other employees made the actual sales, manager functions contributed to the sales.

Conclusion

Although there are conditions allowing inside sales employees to be exempt from overtime, an employee is not automatically exempt simply because he or she is paid a commission.

7 Deceptions to look out for when buying Workers Comp:

If you are a new business, or you have decided it’s time for a new Workers Comp policy, there are a few tricks you really need to be aware of so you don’t get stuck with a very unpleasant surprise! But first, let’s look at what Workers Comp (WC) policies do for you:

A WC policy protects YOU from future claims. It’s the only way to protect your business, your family, and your good name in case of claims today and in the future. In many states, an employee who is injured can pierce your corporate veil, and the business owner becomes personally liable – unless you have Workers Comp!
It provides for your employees when they are injured on the job, and helps them heal and recover, so they can get back on the job as quickly as possible.
It shows that you are a real company, and allows you to bid on larger jobs, it allows you to work in more profitable businesses, and often at a better margin!

Have you seen these red flags?

What could possibly be the problem when buying workman’s compensation? For me, that’s an easy question to answer! Would you rather pay retail, or would you rather buy your supplies, your HR, your benefits, and your Workers Comp for the wholesale price? If you are buying your Workers Comp from your local agent, you are paying RETAIL! Let’s look at some tricks agents use to get you a new policy, and how it can hurt your business, your profits, and your growth.

Using lower payroll: Check carefully and make sure your quote includes ALL of the taxable wages you expect next year. If your agent uses a smaller number for wages, you are going to have to ‘true up’ the shortage at the end of the year. So just when you were thinking you were going to make a profit, your insurance agent tells you that YOU OWE MONEY! Not good!
Using cheaper class codes: Your insurance rate is based on your agent properly identifying the correct code for your business practices. If the proper code is a little more expensive, then your rate may be higher than his competition. You probably don’t know the correct codes, and it may not be a big deal. But if you get audited, it can be a BIG problem for you! YOU OWE MONEY!
Using more expensive class codes: If your proper code is a little less expensive, your good old buddy that’s been your agent for so many years may write you with a more expensive code, or more expensive codes! YOU PAY MORE MONEY – and he makes more commission!
Last minute rate increases: Did you get a last-minute rate increase? If you were considering not renewing your current provider, sometimes there just accidentally happens to be a problem getting you your new rates. Agents know that it may take a week or three to get you a new quote, and if you are getting a big increase, don’t be surprised if it arrives at the last-minute!
Withholding loss runs: Can’t get your loss runs? Agents know it takes loss runs (a list of the claims against your workers comp policy) to get a new policy. And most agents know that if you are asking for loss runs there’s a good chance it’s to move your insurance somewhere else. They also know they are required, by law (which varies by state) to give them to you. So if it’s near renewal time, don’t be surprised if they arrive at the same time your renewal notice arrives, right before your policy expires.
Overpayments being held hostage: Does your Workers Comp carrier owe you money? Don’t be surprised if you are owed money, and it takes 3-4 months to get your premium overpayment or credit back. You are required to get your overpayment back, but sometimes it’s held up for some reason. You know the drill – if you owe me money, I want it now. And if the insurance company owes you money, they don’t seem to be in any hurry. The carrot here is that you want your money back, and you are subconsciously concerned that you won’t get it unless you buy from the same folks. Under normal circumstances, premium reimbursements should take about 60 days.
Not getting the attention you feel you deserve? You are probably right, you aren’t. Most agents that write Workers Comp also write your Commercial Auto, your General Lines business insurance, Commercial Property, maybe your personal car insurance, Life Insurance, and other policies. Frankly, your agent really doesn’t make that much on Workers Comp, and most really don’t have the time (or the experience) that really needs to be invested in managing your claims, working to keep your losses down, and to get your people back to work.

Why you should consider buying Workers Comp from a Specialist:

Here is where a PEO like Eagle can help:

No big down payment! A PEO is usually a ‘pay as you go’ way to buy Workers Comp, so your payments are made each pay period, based on your actual taxable wages paid during that pay period. Your pay period can be weekly, bi weekly, twice a month, or monthly, or in between!
There’s no ‘True Up’ at the end of year! Because your Workers Comp is paid each pay period, there’s no year-end audit to establish whether you owe more money. It’s simple- you don’t.
Buy wholesale – not retail! One of the ways you save money is because you are not buying a new retail policy, you are part of the PEO’s master policy. You benefit from the buying power of the PEO! Don’t pay retail!
Get help keeping claims low! Claims are kept low because it is in both yours and the PEO’s best interests to manage those claims, and get your employees healthy and back to work. This saves you money and helps keep your employees healthy and working.
Safety Programs are professionally run and managed. The fact is that safety programs help keep workers safe and claims low. A PEO puts safety specialists on YOUR team!
Help ensure proper coding. Because the PEO shares the employees with you, the PEO wants to be sure that all employees are assigned the proper workman’s comp codes. So you are assured that your employees are coded correctly. Again, no year-end true up.
State Unemployment Taxes are kept low, because the PEO works to make sure that your former employees find a new job as quickly as possible!

The bottom line really is the bottom line, and Eagle can help you increase your bottom line by providing you, the business owner, the economies of scale that a big company may have developed. You’ll get professionals doing the jobs that your people do, often on a part-time basis, when other duties allow. Our customers stay with us an average of 9 years, so we are definitely doing a lot of things right! And, your insurance agent may love us, because we can do a great job for you, he still gets paid, and we don’t compete with them on any of their other products! You WIN!

7 Deceptions to look out for when buying workers comp

Archive for month: January, 2015