Considerations

• Employee wages are regulated by the Fair Labor Standards Act, which requires employers to pay the federal minimum wage, unless a state has a higher rate, and overtime if an employee works more than 40 hours per week. The act makes provisions to exempt some positions from its requirements, such as executives, administrative, professional and outside sales personnel. Exempt jobs are paid by salary, commission or other agreement, but must average out to no less than the hourly federal minimum wage. Therefore, minimum wage and overtime rules don't apply to these positions.
  
  

Salary Versus Commission

• Salaried exempt employees are paid the same amount of money at regular intervals, such as weekly or twice a month, regardless of the number of hours they work during the pay period. Employees who work on a commission basis earn a percentage of every sale only. Commissions are usually paid on the total revenue, profit or a combination of both. Shifting from salary to commission pay helps an employer by motivating an employee to sell and by not having an outlay of cash with no incoming revenue.
  
  

Sales

• Inside-sales personnel usually don't have to leave their place of business to make a sale. Alternatively, outside-sales employees sell away from their office and seek out customers through demonstrations and visits. Only employees who perform a majority of their duties in outside sales are exempt from FLSA regulations and can be paid on a commission basis only, without regard to minimum wage and overtime. However, inside-sales personnel aren't exempt from FLSA rules and must be paid at least the federal minimum wage, plus 1 1/2 their hourly rate if they work more than 40 hours a week.
  
  

Employment Contract

• In most states, employees are classified as "at-will," which means that they may be terminated for any reason, and they also can voluntarily separate from their employer at any time. However, if you have a signed employment contract, wages can't change until the term is over, unless there is a clause allowing it. In most cases, an employer must give the staff notice before changing wage policies. Essentially, it's an end to one noncontractual employment agreement and the beginning of a new one. If employees don't agree with the shift in pay types, they are free to leave the company without fear of repercussions.