When you are hired for a job, you will either be paid an hourly wage, base salary, base salary plus commissions or commissions only. Commission pay allows employers to pay you based on the amount of products or services you sell for the company. Regardless of how you are paid, you should still at least earn a salary equivalent to the federally mandated minimum wage.
As of the 2010, the minimum hourly wage that must be paid to all U.S. workers is $7.25. Employees who are paid with commissions must still earn at least the mandated minimum wage for the hours worked plus overtime (time and a half) for any hours worked over 40 within a work week. If your commissions are less than minimum wage, you should be paid additional income to make up the difference between earned commissions and minimum wage requirements.
Commissions are paid to workers who complete specified tasks or sell certain goods or services. Employees may be paid commissions in addition to their base salary, or they may earn only commissions. Some types of careers that rely on commissions include car sales, jewelry sales and insurance sales.
If you are paid commissions, your earnings are unlimited. In many cases, commission-based pay ends up being much more than minimum wage. Typically, employees who earn commission perfect their selling techniques and product knowledge over time, which leads to even higher earning potential.
Even the best salesmen or other commission-based workers may not be able to earn an adequate salary when the economy is in a slump. You may be in the habit of earning a lucrative salary and then suddenly sales may stop, leading to one or more months of low earnings. Thus, you may find yourself unable to meet financial obligations when sales drop significantly.
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