FLSA Overtime Calculator Advisor

Commission Payment

When a commission payment covers a period of time longer than a workweek, it must be apportioned back over the workweeks of the period during which it was earned.  If it is not possible or practicable to allocate the commission payment on the basis of when the commissions were actually earned, some other reasonable or equitable method must be adopted (for example, allocation of an equal amount for each workweek covered by the commissions).  The employee must then receive additional overtime pay for each workweek in which overtime was worked during the period.  This is done on a workweek basis by dividing the amount of commissions allocated to the particular workweek by the number of hours worked in that workweek to get the increase in the employee’s regular rate.  One-half of the increase in the regular rate is due for each overtime hour in that week.  See the regulations on allocating commissions to workweeks (29 CFR 778.120) and including commissions in the regular rate of pay (29 CFR 778.119).

To illustrate, an employee received a $1300 commission payment for work performed in the first quarter of the employer’s fiscal year.  The employer is unable to allocate the commissions on the basis of when they were earned, so the employer divides the commission payment ($1300) by the number of workweeks in the quarter (13) for a result of $100 per workweek.  For a week in which the affected employee worked 48 hours, the increase in the employee’s regular rate is $2.08 ($100 divided by 48 hours).  One-half of the increase ($1.04) is due for each overtime hour worked.  The employee is due a total of $8.32 in additional overtime pay for that workweek.

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