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Thu May 24, 2012, 05:53 AM

How is it legal to hire "commission only" sales people?

Last night I went down to my local Sears store to order a dishwasher I had selected online. I could have ordered it online, but I wanted to see it first. I located a helpful young man, checked out the dishwasher, and ordered it without fuss. But when I left the store, I noticed they had a sign at the door listing positions they were hiring and that appliance sales was listed as commission only. Made me glad that I had made the trip to the store to order the dishwasher, appalled that they were paying what are essentially order takers in a mostly deserted Sears store only on commission, and also appalled that there are people desperate enough to take them up on that arrangement. How is this legal?

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Reply How is it legal to hire "commission only" sales people? (Original post)
spinbaby May 2012 OP
ejpoeta May 2012 #1
dipsydoodle May 2012 #2
RockaFowler May 2012 #3
dipsydoodle May 2012 #8
Junkdrawer May 2012 #4
Zalatix May 2012 #11
Egalitarian Thug May 2012 #26
sakabatou May 2012 #5
baldguy May 2012 #6
lookingfortruth May 2012 #7
TheMastersNemesis May 2012 #16
braddy May 2012 #21
KharmaTrain May 2012 #9
Zalatix May 2012 #12
braddy May 2012 #22
morningfog May 2012 #10
KurtNYC May 2012 #13
IDemo May 2012 #14
melm00se May 2012 #15
Nye Bevan May 2012 #24
DotGone May 2012 #27
RockaFowler May 2012 #30
Springslips May 2012 #17
guardian May 2012 #18
-..__... May 2012 #19
rustydog May 2012 #20
xchrom May 2012 #23
aint_no_life_nowhere May 2012 #25
Ruby the Liberal May 2012 #29
Ruby the Liberal May 2012 #28
Digit May 2012 #34
slackmaster May 2012 #31
datasuspect May 2012 #32
Capt. Obvious May 2012 #33

Response to spinbaby (Original post)

Thu May 24, 2012, 06:07 AM

1. I was not aware of that. I don't know how it is legal

but it ticks me off to hear that.

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Response to spinbaby (Original post)

Thu May 24, 2012, 06:07 AM

2. Difficult to comment on

in the absence of knowing how commission only staff get paid in comparison with salaried staff paid with or without commission too.

How does US employment law distinguish between the two ? In the UK such an arrangement , if the employee worked solely for one employer , it would most likely fall under "master/servant relationship" and as such construed as being a normal employee for employment rights.

Some may have a preference for commission only : depends on commission levels. This is a subject normally associated with direct selling.

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Response to spinbaby (Original post)

Thu May 24, 2012, 06:08 AM

3. Almost all dept stores are commission only

Macy's is the same way for all departments.

I work in TV Sales and our reps are straight commission. If they don't sell they don't get paid.

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Response to RockaFowler (Reply #3)

Thu May 24, 2012, 07:03 AM

8. Its the best incentive to succeed.

Earn or starve.

We don't don't actually have such an analogy in the UK other than in direct sales..................said the ex-photocopier salesman from the eighties.

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Response to spinbaby (Original post)

Thu May 24, 2012, 06:16 AM

4. According to this, federal minimum wage laws still apply...



Minimum Wage
Employers must pay commission-only employees at least the minimum wage.

Overtime
Employees who are paid commission-only are entitled to receive time and a half in overtime pay for hours worked beyond a 40-hour workweek. The Fair Labor Standards Act provides an exemption for employers who are considered to be retail and service establishments. For an employer to fall into this category, 75 percent of the annual dollar volume of the sales of goods or services must come from sales that are not resales. Also, the sales of goods or services (or both) must be recognized as retail sales in the particular industry.

Exemptions
Certain exemptions excuse employers from paying their commissioned employees for overtime. Employers must meet three stipulations to be exempt: the employer must be a retail or service establishment, the employee rate of pay must be more than one and one-half times the applicable minimum wage for every hour worked in a workweek, and more than half of the employee's total earnings during a specified time period must be from commission. Unless all three stipulations are met, the employer can't be exempt from the overtime regulation.


http://www.ehow.com/list_6857355_labor-regarding-commission-only-jobs.html

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Response to Junkdrawer (Reply #4)

Thu May 24, 2012, 07:34 AM

11. Indeed, if you have to come in and work a set number of hours and abide by a dress code

 

you PROBABLY do not qualify for commission-only.

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Response to Junkdrawer (Reply #4)

Thu May 24, 2012, 01:35 PM

26. Now, try getting it enforced. n/t

 

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Response to spinbaby (Original post)

Thu May 24, 2012, 06:31 AM

5. When I was working, I was getting paid by commission

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Response to spinbaby (Original post)

Thu May 24, 2012, 06:36 AM

6. The concept preys upon the Horatio Alger myth: "If you work hard enough you can succeed at anything"

It goes with the idea that the poor are not only lazy, they're evil. And the rich are - by definition - hard workers blessed by God.

Of course, being a myth these ideas are full of shit.

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Response to spinbaby (Original post)

Thu May 24, 2012, 06:37 AM

7. Hate to sound like a rude person but blame the Reagan era. It is in the 80s when people

 

became introduce to the terms "Sales Associate" and the like allowing people to work at commission only jobs. What happens in these situation is that when it is commission only they expect you to sale at least so much each month. When it is commission only the expectation is there that the person will sale X amount each month.


Say appliance is $150 dollars.


You think sears bought it from the mani factor for about $80 dollars


You have Sears Mark up (or what they get for selling it. ) $55 per item than you pay the sales person 10 % commission that's $15 dollars.

Not only that with terms uses like sale associate they re-classify the worker as someone who doesn't depend on a hourly salary.

Their are all these loopholes that people have a way getting around min wage.

Are you in a Right to Work state? These are the biggest offenders.

I'm in my 30s and my friends and I see jobs posted like that all the time and usually you are not considered full time and your hours are often dictated by your sales.




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Response to lookingfortruth (Reply #7)

Thu May 24, 2012, 08:18 AM

16. The No Job Jobs Of The 21st Century

This job is an example of the corporate world's move to end full time jobs and turn all jobs into "contract labor". The GOP and Romney future for new jobs is to have people work as independent contractors. If you look up the Reagan Myth on Youtube you will find Raoul who has featured my article about the Reagan Revolution and how it means that everyone will be and "associate" and not an employee.

Why do you think that Romney and the GOP support ending employer paid health care and favor workers buying individual insurance on the free market? That is why they want to abolish the Affordable Health Care Act.

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Response to lookingfortruth (Reply #7)

Thu May 24, 2012, 11:26 AM

21. Commission only, well predates the 80s, it predates my lifetime.

In some jobs like door to door sales, it is the only form of pay that works.

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Response to spinbaby (Original post)

Thu May 24, 2012, 07:13 AM

9. Better Than "Independent Contractors"

As others here have stated, most sales people I know were commission only. At one time some of the better prospects were initially given a stipend or "draw" until they built up enough of an account list that they could fly solo on commissions. A good sales person could make a lot of money and these positions would come with other perks like cars, free food and merchandise.

The real predators I encountered tried to get people to work as "Independent Contractors"...this way they could avoid paying any taxes or benefits...you were totally on your own. One company purposedly hired young kids who had no clue how badly they were getting screwed and when they quit they'd find some more. One went as far as to bring in "interns" who were given college credit but did jobs that usually went to full time people and the employer didn't pay a dime. Eventually he got caught...got a fine from the IRS and went on his merry way...

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Response to KharmaTrain (Reply #9)

Thu May 24, 2012, 07:37 AM

12. Yes, that happens a lot in the Insurance, Herbalife, Mary Kay, Primerica, etc industries

 

I am fairly confident that this sales model will become prevalent before it gets encroached upon by web sales. Store employees will go the way of the dodo bird in favor of a bifurcation between independent contractor sales and online sales.

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Response to KharmaTrain (Reply #9)

Thu May 24, 2012, 11:31 AM

22. Independent Contractor always worked for me, but only if it was real

Truly being an independent contractor was fine, the con (and it was rampant as you point out) was when really you were just a regular employee told when to work, and how, and where, yet they scammed you by pretending that you were your own boss.

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Response to spinbaby (Original post)

Thu May 24, 2012, 07:23 AM

10. There are more positions and occupations exempt from minimum wage and OT laws

than people realize.

Usually, to be purely commission only, the employee would need to be an 'outside sales' person. Someone who sells in a store and doesn't seek out those who they sell to, probably have some type of minimum wage guarantee.

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Response to spinbaby (Original post)

Thu May 24, 2012, 07:45 AM

13. Many sales jobs are really tough

and when you see the employer constantly trying to recruit new sales people you know there is turn over.

I know people who worked their ass off to develop a new sales territory only to have the company take it away from them the moment they got several good customers.

And those extra warranties are part of the deal too. They practically tackle you if you try to leave without one. My friend told one of them "wait, you just said this was high quality product and now you are telling me 'oh I wouldn't leave the store without that extra warranty protection' so which is it?"

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Response to spinbaby (Original post)

Thu May 24, 2012, 08:05 AM

14. Worst job of my life

Right out of high school, I was recruited by a local outfit to sell accident insurance door to door on a straight commission basis. Let's just say it soon became obvious that I was not a born salesman!

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Response to spinbaby (Original post)

Thu May 24, 2012, 08:09 AM

15. if you work a "commission only" gig

most (if not all) companies pay what is called a "recoverable draw".

you get paid an hourly salary but that salary is offset by your earned commissions.

let's take a normal work week: 40 hours

week #1

40 hours @ $10/hour (your draw) = $400
During that week, you are a stellar salesperson and earn $850 in commission.


Week #2

40 hours @ $10/hour (your draw) = $400
During that week, you have a bad week and earn $275 in commission.

Week #3

40 hours @ $10/hour (your draw) = $400
During that week you break even with $400 commission

Week #4

40 hours @ $10/hour (your draw) = $400
you hit a homerun and earn $2000 in commission


Your paycheck will look like this:

Salary: $1600
Earned commissions: $3525
total gross pay: $1925

If you have a bad string of weeks, you can end up going into the hole and "owe" back the money drawn against future commissions but with a draw you are guaranteed a $400/week paycheck.

What happens if you leave the company with a negative balance in your (recoverable) draw account? technically you owe the money back but after 20+ years in sales, I have only seen a company go after someone for the draw balance once and that was because they rolled up the draw balance into a civil suit over another, more serious, matter.

working on commission is extremely challenging but can be extremely lucrative if you are a good salesperson even if you are part time. I managed the computer dept for a (now defunct) department store and I had a kid (20 years old) who earned almost $3000 on weekend afternoon 2 weeks before Christmas (and this was back in the early 90's)

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Response to melm00se (Reply #15)

Thu May 24, 2012, 12:04 PM

24. Thanks. That actually sounds pretty reasonable, and fair (nt)

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Response to melm00se (Reply #15)

Thu May 24, 2012, 01:43 PM

27. As a former commisions salesperson at Sears, this is how it works

I quit after they kept dropping commissions down to nothing (1%-2%). White goods were the only department where commissions were decent.

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Response to DotGone (Reply #27)

Thu May 24, 2012, 02:26 PM

30. That was my problem with Sears, too

I worked in Electronics and it was worse. You had to sell Proscans to even make 10% commission. If you sold a LXI (Sears Brand) you got 1%. They were cheaper and well you got paid next to nothing for it.

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Response to spinbaby (Original post)

Thu May 24, 2012, 09:06 AM

17. I know one thing.

If I ever work a commission only sales job then selling is all that I'm going to do! No cleaning, no doing the restrooms, no helping out when other departments are short handed. Ask me and I'll tell the management to fuck off. If I have no customers, and all my paperwork is caught up, then I'm sitting my ass down and reading a book.

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Response to spinbaby (Original post)

Thu May 24, 2012, 10:25 AM

18. Yes it is legal

 

Most real estate brokers work on commission only.

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Response to spinbaby (Original post)

Thu May 24, 2012, 10:34 AM

19. There's a downside for the consumer...

 

in that it encourages overly aggressive and dishonest salespersons.

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Response to spinbaby (Original post)

Thu May 24, 2012, 10:57 AM

20. I was briefly in retail sales in the mid 70's

One retailer (a shoe store) paid minimum wage to salespeople, but when you reached x-level of sales you made commission. If your sales dropped below the benchmark, you returned to minimum wage.

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Response to spinbaby (Original post)

Thu May 24, 2012, 11:58 AM

23. Worked in sales most of my life.

I won't work commission only.

My employer has a duty to me that doesn't involve the customer.

It's gotta be commission + wage.

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Response to spinbaby (Original post)

Thu May 24, 2012, 12:22 PM

25. When I was a young man and working musician back in the mid 1970s

our band was hired to go to the Dallas, Texas area to play in a large club called Daddy's Money with an 8-week contract. I was shocked to find out that every waiter, waitress, busboy, and hostess in the large club worked for tips only. They received no base hourly pay. The Manager explained to us with glee that Texas law allowed this and that there were plenty of local college kids willing to do the work even though it might involve waiting a table for free if no tip was paid. The Manager was a real prick and he shorted our pay for the final 2 weeks and the Musician's Union said that club did it all the time. Anyway, these were not sales positions working for commissions but they were also jobs where a base hourly wage was not required under State law. Might it depend on the State where the commission-only sales employees work?

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Response to aint_no_life_nowhere (Reply #25)

Thu May 24, 2012, 02:19 PM

29. It is also legal to make people pay to work someplace.

That happens in a lot of hair salons (they get a cut of the fees and have to pay "booth rent") and in strip joints where the dancers have to pay nightly a set fee out of their tips for the privilege of working there.

I get that, but we are in an employer-based healthcare system here in the US. If we had UHC, it wouldn't be nearly the issue. No employer plan, then you can expect to pay more than your rent/mortgage just to be covered.

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Response to spinbaby (Original post)

Thu May 24, 2012, 02:15 PM

28. Another 'fun' angle to this is many companies pay commission as 1099 wages

with no backdrop/draw (W2) meaning that there are no benefits (insurance), no unemployment compensation eligibility if things go south, and the "employee" is required to pay double taxes into FICA and Medicare.

Good offsets are that they can't set your hours and you can offset expenses against income without having to deal with minimums.

Going into such work can be a scary proposition, especially in a crap economy. Been there.

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Response to Ruby the Liberal (Reply #28)

Thu May 24, 2012, 02:46 PM

34. Been there, too

As a Realtor, I was accustomed to working as an independent contractor but due to physical issues that career ended. Yes, you a have to pay both sides of FICA and Medicare but also have to file quarterly taxes which is a pain.
Later, I was selling big ticket items for an hourly wage plus commission and was considered an employee which worked out fine until the
economy tanked and less people could afford these items. That company also cut the commission which was a double whammy.

Now I am seeing telemarketing jobs paying commission only and wonder who would be in their right mind to apply to such a scam.
Actually, I have been noticing more and more positions being advertised as commission only and they strike me as merely a way to get free labor.

I would not work in commission only job at this time.

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Response to spinbaby (Original post)

Thu May 24, 2012, 02:31 PM

31. Simple answer - It's legal because it's not illegal

 

Everything that has not been specifically proscribed by due process of law is legal.

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Response to spinbaby (Original post)

Thu May 24, 2012, 02:35 PM

32. it's the only way to go

 

furniture/dept stores/car lots are the training fields of many a great salesperson.

hell, you could make a career out of retail commission sales, and live quite well.

you get what you put into it.

coffee is for closers.

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Response to spinbaby (Original post)

Thu May 24, 2012, 02:36 PM

33. I met a commission only person

When the economy cratered he lost his white collar job. He ended up selling mattresses and told me he made more money selling mattresses than he ever did.

He then told me I should sell mattresses and he could get me a spot.

I declined.

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