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Commission Pay in Texas

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  • Commission Pay in Texas

    We are a medical billing company in Texas, and we are considering moving some employees to a commission based pay, due to severe nonperformance while on hourly pay. The employees are not sales staff, but the commission would be based on insurance approvals, obtained through phone calls. Are these employees legally eligible for commission based pay? Does the minimum wage requirement still apply if their commission does not meet minimum wage? Are the employees eligible for unemployment if/when the conversion to commission reduces their pay? If they quit, would they be eligible for unemployment due to the pay change?

  • #2
    You can set up any compensation plan you want, but the employees still must average at least minimum wage for all hours worked in the workweek. If the "commissions" do not bring the employee to that level, you must make up the difference.

    I do not know Texas' stance on partial benefits for pay reductions; in my state (which is not Texas), if the worker is working 40 hours per week, partial benefits are not payable, even if the pay is less than it was before.

    If they quit, they will have an uphill battle getting unemployment benefits. The state would rather have the worker having some income than none at all.

    I wonder why you would just not let the nonperforming employees go. Such a pay reduction doesn't normally result in improved performance.
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    • #3
      Agreed with Patty.

      It is very hard to legally not pay employees at least minimum wage. Pretty much the only good exception is the Outside Sales exception, which does not include phone sales. This is very black letter law, meaning any possible argument has been tried, and lost. A lot of employers trying to claim that phone sells were not subject to MW have lost big time in very publicized court cases in recent years. Many of them were mortgage industry or financial industry, including some very deep pocket employers that everyone who has heard off, that were also TARP recipients. If you want to qualify for Outside Sales, make your employees go knock on customer's doors.

      If the employees are smart, they will not quit, but rather file for UI while still working. It works, or it does not, but the state will not penalize the employee.

      If the employees are not worth MW, let them go. Trying to play UI games is not worth keeping non-productive employees aboard. And employers trying to force employees to quit could by itself qualify the employees for UI. States do not like employees who quit, but they also do not like employers who try to make the employees quit.
      "Reality is that which, when you stop believing in it, doesn't go away".
      Philip K. **** (1928-1982)


      • #4
        Our owner does not want to fire the employees because we have been burned by unemployment in the past. We had an employee who walked out be awarded unemployment benefits. Thanks very much for the fast response, I was pretty sure we would have to still pay minimum wage, but needed verification. Is there any way you could please provide references?


        • #5

          "Reality is that which, when you stop believing in it, doesn't go away".
          Philip K. **** (1928-1982)


          • #6
            Thanks VERY much!


            • #7
              That's a bad reason

              Originally posted by JBell View Post
              Our owner does not want to fire the employees because we have been burned by unemployment in the past.
              Would your owner rather keep his experience rate low and have one (or more) disgruntled employees with the keys to the plant and able to sabotage business operations? How much does your owner think his experience rate factor will increase?

              Once, while an operations manager, I needed to terminate a production supervisor. My HR department (out of state) wanted to hold out for demoting him to a worker position. Yeah, I really needed someone who knew more about the production processes than I did thoroughly pissed off and coming to work every day! Fortunately for me, my VP listened to me.

              If you have a non-performing employee at $20 per hour, they will not perform better at $10 per hour, I guarantee.
              Last edited by Texas709; 01-14-2011, 06:40 AM.