An FLSA overtime exemption for commissioned employees of retail or service establishments who earn at least 1.5 times minimum wage and whose commissions represent more than half of their total pay.
Why Retail Sales Exemption (FLSA) matters for employers
Under Section 7(i) of the FLSA, employees of retail or service establishments may be exempt from overtime if they earn more than 1.5 times the applicable minimum wage and more than half their compensation represents commissions on goods or services. This exemption applies to establishments where 75% or more of annual sales are retail in nature and not for resale. Auto dealerships, clothing stores, and furniture retailers frequently use this exemption for commissioned sales staff.
The exemption must be evaluated on a workweek-by-workweek basis. If a commissioned employee's earnings fall below the 1.5x threshold or the commission proportion dips below 50% in any workweek, overtime must be paid for that week. Tracking these thresholds accurately is essential to avoiding FLSA exposure.
How BEG handles Retail Sales Exemption (FLSA) for clients
BEG Managed Payroll handles Retail Sales Exemption (FLSA) as part of a fully managed payroll service at $25-$45 per employee per month. Clients do not need to track compliance rules, filing deadlines, or calculation methods related to Retail Sales Exemption (FLSA) on their own. Everything is included. Learn about BEG Managed Payroll.
Frequently asked questions
Do employers have to manage Retail Sales Exemption (FLSA) themselves?
No. A managed payroll provider handles Retail Sales Exemption (FLSA) as part of full-service payroll. BEG manages this for clients at $25-$45 PEPM with no system migration required.
What happens if Retail Sales Exemption (FLSA) is handled incorrectly?
Errors related to Retail Sales Exemption (FLSA) can trigger IRS penalties, state agency assessments, or employee disputes. Catching and correcting errors before filing is far less costly than after-the-fact corrections.
How does BEG handle Retail Sales Exemption (FLSA) for managed payroll clients?
BEG tracks, calculates, and remits everything related to Retail Sales Exemption (FLSA) as part of fully managed payroll. Clients do not need to monitor compliance -- that is included in the service at $25-$45 PEPM.
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About the author
Anthony Moretti is VP of Sales at Business Executive Group, where he builds BEG's managed payroll and HR service verticals for employers across Dallas-Fort Worth and nationwide. He writes the BEG Payroll Glossary to give employers plain-English answers on payroll and compliance.
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