FLSA/Wages

Overtime Regulations Q&A: Commission Instead of Minimum Salary for Manager?

Question: Can a company pay a restaurant manager commission only on sales (3%) instead of paying them the new salary rate based on the new DOL overtime regulations for December 1?

overtime regulations question

Answer (from the experts at HR.BLR.com): Thanks very much for your question.

The short answer is no.

In order for the restaurant manager to be considered exempt, the manager must meet the job duties requirements for the executive exemption (unchanged by the new Fair Labor Standards Act (FLSA) regulations) and be paid on a salary basis of at least $913 a week (the equivalent of $47,476 annually).

The new regulations, which take effect on December 1, 2016, do allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new standard salary level. In order to count, these payments must be paid on a quarterly or more frequent basis. See 29 C.F.R. §541.602(a)(3).

So, while a straight commission of 3% of total sales would not satisfy the FLSA exemption salary requirement for an executive, you may pay the employee up to 10% of his salary as commission.