Are employers allowed to pay commissions in lieu of an hourly wage?

Yes, employers in California are allowed to pay employees commissions in lieu of an hourly wage. This is made possible by the California Wage Orders, which provide guidance on how employees are to be compensated in California. Commissions are considered a separate form of payment from an hourly wage. Employers typically use a commission-based system to incentivize employees to generate more sales or perform a certain number of tasks. In such situations, employers can legally pay employees commissions in lieu of an hourly wage, as long as the commission paid is equal to or greater than the hourly wage that would have otherwise been paid. Employers wishing to pay commissions in lieu of an hourly wage should ensure that the commission payment is properly calculated and documented. This is especially important in the case of employees entitled to overtime wages, as failure to do so may result in a violation of California labor law. Furthermore, employers should remember that commission payments do not absolve employers from their obligation to pay the mandatory employer contributions for employee benefits, such as Social Security and Medicare. In other words, employers must pay employee-side contributions, as well as employer-side contributions, on all wages earned by employees, regardless of whether those wages are hourly or commission-based.

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Are employers allowed to pay commissions in lieu of an hourly wage?

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