California Insurance Firms Gamble and Lose

oops

According to an announcement from the Department of Labor, two California insurance firms recently found themselves in hot water because of how they were paying employees.

Apparently, these folks didn’t realize that paying employees on a commission-only basis does not get you off the hook for minimum wage, overtime and record-keeping rules. This was an expensive lesson: the fines and back wages totaled almost $120,000 for one company and about $200,000 at the other.

So what were they doing wrong?

Because they only paid commissions, they apparently didn’t bother keeping time records for anybody. Which meant they weren’t keeping track of how many hours people were working or how their pay translated into hourly wages — which in turn meant some people made less than minimum wage some weeks, and some weren’t paid overtime when they worked over 40 hours in a week.

As a result, in addition to the fines, back wages and penalties, the companies were also ordered to implement timekeeping systems to keep track of workers’ hours. (We’ve got some good suggestions for them if they’re still looking for the perfect system! 😉 )

Back in 2011, some Ashley Furniture HomeStores in Texas found themselves in a similar situation, so apparently it’s not as uncommon as I initially thought. They had to come up with an additional $57,000 in back wages. In the case of the Ashley Furniture stores, a company spokesperson said they were unaware of the federal wage regulations related to commission-only employees, and didn’t realize that if these folks work more than 40 hours in a week, the company must make sure they receive at least 1.5 times the federal minimum wage for their overtime. If their commission pay is not sufficient to meet that threshold, the company is required to make up the difference.

Word to the wise: if any of you pay your employees on commission, be sure you keep track of how much time they’re actually working, and how those commission payments translate into hourly wages.

Do you pay any of your employees on pure commission? If so, what steps do you take to make sure they’re getting at least minimum wage?

7 Comments

  1. Tory Dzuricsko says:

    I have a very simple spreadsheet that I use in a salon setting where nail techs are paid the service wage of $2.84 per hour. Naturally, with a 40% commission on sales offered, in addition to tips, they earn much more per hour than $2.84!

    However, what if I bring a tech in early to attend a meeting and then do some salon rearranging and such and she/he works 5 hours while doing only say, one service? Well, she would earn more than $2.84 per hour but LESS than minimum wage.

    My simple spreadsheet not only tracks hours worked (manually), but it also just requires a few keyboard clicks to ensure that the nail tech receives minimum wage, as I can easily make up the difference to comply with minimum wage requirements. But as I said, the techs generally earn MUCH more per hour than minimum wage, but it’s those rare situations that one has to watch out for.

    If you’d like to see the sheet, email me and I’ll be happy to share it with you. It’s such a simple sheet, it’s almost laughable, but it takes away the excuse made by many that “Having a fancy program to do this is too expensive!”

    Tory D.

    • Diane A says:

      Hi, Tory! Thank you for taking the time to share your solution with us. You’re right — it’s often easier (and less expensive) than people think to make sure folks get paid at least minimum wage, and get paid proper overtime.

      In fact, it’s always less expensive to do it right the first time than to pay all those fines and penalties for doing it wrong, even counting in the cost of a time and attendance software program or a time clock. (And since I work for a time and attendance company, I’m happy to say that software — even a “fancy program” — doesn’t actually cost as much as folks might think. Our timeQplus is a full-featured software package that can be had for as little as $129.)

      Glad to hear you were able to figure out a simple way of tracking minimum wage compliance that works for your business! I think that’s the key — find a way that works for you, because that way you’ll be more likely to stick with it. If you don’t mind my asking, how do you know how many hours your nail techs work? Do they simply tell you their total hours (for the day or for the week), do you make a note yourself of when they come in and leave each day, or do you have some sort of time clock to track arrivals and departures?

    • Tino Poblete says:

      Tory, I would like a copy of your spreadsheet too. thx.

    • bahloo says:

      Tory, Id also like a copy of your speadsheet! Thanks!

  2. Tory says:

    Thanks for your response! I manually enter the hours worked into the spreadsheet, but I capture the actual hours worked data from our Insperity time system, which the techs use to record their arrivals and departures. Perhaps some day I’ll link it all together, but for now, it serves its purpose, seeing as I only have a whopping 5 employees!

  3. Cherine says:

    Tory, I would love to see your spreadsheet as I am in the process of opening a salon and a bit overwhelmed on how to pay my future techs…especially in the early stages!!

    • Diane A says:

      Cherine, you might also want to take a look at our newest product, BioTouch. It gives you the option of having employees clock in using a fingerprint, a badge or a PIN, then it exports their time records to handy Excel spreadsheets. It uses a USB thumb drive to transfer the records, so you don’t have to install any software or connect the clock to a PC or network. It’s really easy and straightforward, especially for a startup business such as yours. We just introduced it a couple of months ago, and it’s already very popular with our customers.

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