What About Legalities?
Paying draws and commissions can be tough if you don’t understand the legalities behind your plan. An important part of clear definitions in a sales compensation commission plan means you need to explain what happens if a salesperson sells nothing or has collected too many draws with no sales.
Most states, as far as paying employees, are governed by each State’s Labor Laws. Often these laws are set by the US Department of Labor but can vary from state to state.
For example, if you have a salesperson on-site all the time, if he doesn't sell anything, and has been paid too many draws and then payroll comes along, you can’t just skip paying him. In New Mexico, even if an on-site salesperson doesn’t sell, the employer is still required to pay the salesperson minimum wage based on the amount of time spent at the store.
For salespeople that are paid through territorial commission sales, or those who are based away from the store, you may not have to pay the salesperson minimum wage as it may be impossible for you to account for hours actually worked.
Prior to setting up your sales commission plan, it’s best to check with your local Department of Labor to ensure you are following labor laws on employee payouts.