What is the law in ohio on straight commission employees? Do I have to pay my employees a base pay/hourly rate? Or is it legal for me to pay them a percentage of the services they provide? I own a beauty salon and I can't find a solid answer.

As long as their take home pay equals AT LEAST the minimum wage required by law, you are free to pay however you wish. You MUST pay them at least minimum wage for each hour worked (with applicable overtime pay if necessary).

then what is the difference between straight commission and commission vs. draw?

Commission vs. draw basically means the employee is guaranteed a certain "base hourly wage" (which, legally they are entitled to at least minimum wage anyway) or their commission, whichever is higher for the period. For example, if an employee's hourly wage is $6 and they worked 30 hours but they earned $250 in commission for that week, then they would be paid $250. If the commission for that week was only $100, then they would be paid their hourly wage, leaving the $100 as the "draw" which they could then apply to any weekly pay cycle they wish. (this is how I understand it anyway, if someone with more experience in this area comes along, they will correct me~!)

Either way, your employees are entitled to at least minimum wage for each hour worked and any applicable overtime. Any commissions and bonuses are up to you.

A commission is a fee or percentage paid to a sales rep for services rendered.

A draw is a minimum salary based on commissions that a sales rep can be expected to earn. Typically if no sales are earned, this is the minimum salary that your sales rep would receive. The draw would be deducted from future commissions (i.e. "draw against commissions" term).

Commission vs. draw basically means the employee is guaranteed a certain "base hourly wage" (which, legally they are entitled to at least minimum wage anyway) or their commission, whichever is higher for the period. For example, if an employee's hourly wage is $6 and they worked 30 hours but they earned $250 in commission for that week, then they would be paid $250. If the commission for that week was only $100, then they would be paid their hourly wage, leaving the $100 as the "draw" which they could then apply to any weekly pay cycle they wish. (this is how I understand it anyway, if someone with more experience in this area comes along, they will correct me~!)

Either way, your employees are entitled to at least minimum wage for each hour worked and any applicable overtime. Any commissions and bonuses are up to you.

Certain sales personnel MAY be exempt from the FLSA overtime provision.

Topical Fact Sheet #20 goes over this. You can visit DOL at http://www.dol.gov/esa/regs/compliance/whd/whdfs20.htm. Parts of the DOL website seem to be temporarily down at the moment.

To be exempt from overtime, there is a minimum pay requirement. I don't have that number at hand right now. I want to say it's something like 2x minimum wage.

Would a hairstylist be considered a salesperson?

I'm fairly sure the only sales positions that are NON-exempt are in industries that deal with interstate trade (a fairly vague description, but I recall reading that in the FLSA) in some way... I may be wrong, but I do recall reading that.

Would a hairstylist be considered a salesperson?

I'm fairly sure the only sales positions that are NON-exempt are in industries that deal with interstate trade (a fairly vague description, but I recall reading that in the FLSA) in some way... I may be wrong, but I do recall reading that.

If a retail or service employer elects to use the Section 7(i) overtime exemption for commissioned employees, three conditions must be met:


the employee must be employed by a retail or service establishment, and
the employee's regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked, and
more than half the employee's total earnings in a representative period must consist of commissions.
Unless all three conditions are met, the Section 7(i) exemption is not applicable, and overtime premium pay must be paid for all hours worked over 40 in a workweek at time and one-half the regular rate of pay.

As long as you make under $455 per week ($23,660 annually) then you have guaranteed overtime protection under the FLSA regardless of your job description. Kind of off the original topic, but the DoL site isn't being very neighborly and I've been trying to answer that for my own personal satisfaction since it was brought up earlier.

I have had problems with DOL site tonight also.

If the 3 conditions are met in my last post, it's possible that a commission-only worker COULD be classified as exempt and therefore not eligible for OT consideration.

Even if they make less than the minimum required for exemption?

Even if they make less than the minimum required for exemption?

This exemption is for the overtime premium. The employee must still earn at least 1 and 1/2 times minimum wage at the regular rate of pay for all hours worked in order to qualify.

For example, employee earns $400 commission for 45 hours worked.

The regular rate of pay is ($400 divide by 45 hrs) $8.89 per hour.

Minimum wage rate in Ohio is $5.15 per hour.

Since $8.89 per hour is greater than $7.73 per hour (1 and 1/2 times minimum wage), this method would meet the guidelines for the overtime "premium" exemption.

A problem would exist if the pay ever falls below $7.73 per hour.