Legally, workers categorized as W-2 can obtain compensation solely by means of commissions. This construction requires cautious adherence to federal and state wage and hour legal guidelines, notably regarding minimal wage necessities. As an illustration, a salesman incomes commissions may obtain a draw in opposition to future commissions to make sure minimal wage compliance. This draw acts as an advance that’s later reconciled in opposition to earned commissions.
Providing commission-based compensation to W-2 workers can incentivize efficiency and align worker targets with firm aims. Traditionally, this mannequin has been prevalent in gross sales roles, fostering a results-oriented work surroundings. Nevertheless, the authorized panorama surrounding commission-only constructions has advanced, emphasizing employer duty for guaranteeing honest labor requirements are met. Correctly carried out, this compensation mannequin can profit each the employer and the worker.