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Vacation Pay for Commissioned Employee

How do I calculate vacation pay for an employee who is paid strictly on a commission basis?

There is no federal requirement to provide commissioned employees with paid time off benefits. Thus, it’s up to the employer to determine the best way to calculate the commissioned employee’s rate of pay.

The Society for Human Resource Management provides the following explanation:

Generally, commission-only employees are able to receive an advance or draw on future sales that have not been earned or are not currently available. Once the commission sales are available and paid to the employee, the “draw” amount is deducted from their compensation.

While an employer can use various combinations of draws plus commissions to determine the calculation method for paid leave, three options are most commonly used when determining how much a commission-only employee will be paid for vacation time:

1. Use the minimum wage as the rate of pay for vacation/paid leave (also counts as a draw).
2. Limit the total pay for vacation/paid leave to the amount of the salespersons’ usual draw.
3. Use the total wages earned (base, commissions and bonus) over the previous quarter or other representative period and divide by the number of weeks in the quarter.

In the third option, for example, Sue has earned commission for January, February and March and wants to take one week of paid vacation in April. One option would be to use March’s earnings since it is the closest month to the leave, and pay Sue one week of pay that is equivalent to one week of Sue’s earnings in March. Another option is to average Sue’s earnings over the previous quarter leading up to the leave. This would mean adding the wages earned for January, February and March and dividing the total wages earned by the total number of weeks in those months.
Since there is no federal requirement to provide paid leave, the employer can choose what the “representative period” will be when determining the rate for paid leave. However, it is important to select one method of calculation and apply that method consistently to all employees who earn commission.

It’s advisable to adopt a clear, easily understood policy that addresses vacation pay for commissioned employees. Since some states have implemented laws regarding vacation benefits, it’s also important to be aware of such applicable laws and any specific requirements for commissioned employees.

August 1st, 2015, 9:04 PM |  Posted in: Benefits, Compensation |
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Recently we had an employee spend two weeks out of the office because they were hospitalized. As soon as I became aware that the employee was out of the office due to hospitalization I sent an email to the manager asking the manager to keep the nature of the employee’s absence confidential and to not share it with anyone unless they are on a need to know basis. She never responded to my email. I’ve recently discovered that a discussion took place between our office treasure and another co-worker in the same dept. as the one who was in the hospital. This co-worker disclosed to the treasure that this employee was out of the office in critical condition and was suffering from (sickle cell anemia) Aghast! Imagine my horror when I found this out. Now, our company is in NY and while this would not be considered a HIPAA violation this would most certainly be covered under GINA (Genetic Information Non-Disclosure Act) or would it? I talked with the treasure and advised the potential liability with discussing such a private matter on the floor where everyone else can hear. He assured me that he was not aware that he was doing anything wrong but would never repeat the employee’s condition to anyone. Additionally, I asked the treasure who disclosed this personal information to him and he responded and said I do not remember which one of the two people I discussed this with told me and I would not want to give you a name and be wrong. I already know who disclosed this info to him so I was hoping he’d share with me as well. I have a few questions – how should I go about handling this matter? Here are my solutions: 1.Send a general memo to all reminding everyone the importance of not discussing and/or disclosing private information. This would include health related issues and the like. This includes managers, supervisors, and employee water cooler discussions. 2. Speak to the employee whose confidential info was shared & advise her of corrective steps.

Title II of the Genetic Information Nondiscrimination Act (GINA) prohibits discrimination on the basis of genetic information when it comes to any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoffs, training, fringe benefits, or any other term or condition of employment. Additionally, employers may not limit, segregate, classify or otherwise mistreat employees based on their genetic information. Basically, it’s against the law for an employer to use an employee’s family health history or genetic test results in making employment related decisions.

Title II of GINA applies to private employers and state and local government employers with 15 or more employees, employment agencies, labor unions, and joint labor-management training programs.

Covered entities in possession of genetic information about employees must keep the information confidential and, if the information is in writing, must keep it apart from other personnel information in separate medical files.

The “water cooler problem”, as the EEOC calls it, is considered inadvertent acquisition of genetic information. Thus, the situation is not a violation of GINA but the importance of confidentiality must still be addressed.

It seems you’ve handled the situation just fine so far and the corrective actions you suggest are advisable. Educating employees on the importance of confidentiality and the effects of workplace gossip is the best way to reduce the risk of unintentional disclosures of private information. It’s important to periodically remind employees, especially managers, of applicable laws and company policies on confidentiality. It’s also import to immediately counsel offenders and sternly address problems with repeat offenders.

August 1st, 2015, 8:40 PM |  Posted in: Labor Laws |
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How much vacation is the norm?

We currently offer: Years 1 – 5 10 days Years 6 – 10 15 days Years 11+ 20 days Is this competitive for a small – medium sized company?

Yes, your plan is competitive for a small to medium size company and even for many large companies.

When determining the competitiveness of paid time off benefits, it’s also important to consider sick time and holidays. It’s average to offer employees 10 paid sick days per year and at least 5 paid holidays.

August 1st, 2015, 7:27 PM |  Posted in: Benefits |
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Employees Not Punching In/Out

Can I fire or terminate an employee because he or she does not punch in or out and makes the Payroll office employees waste time tracking their hours? I am in Illinois.

Illinois, like most states, is an employment at-will state, meaning that either an employer or employee may terminate the employment relationship at any time, without any reason or cause.

However, an employer cannot terminate an employee based on personal characteristics as defined under both federal and state laws. Under these laws, it is illegal for an employer to discriminate against an employee based on sex (including pregnancy and childbirth), sexual orientation or identity, genetic information, disability, age (over 40), national origin, race, color, religion, citizenship status, military status or unfavorable military discharge.

Also, if a collective bargaining agreement, employment contract or company policy states that an employee may only be terminated for cause or under certain situations, the employer must abide by the terms of the agreement.

It’s advisable to adopt a practice of progressive discipline. Progressive discipline provides a graduated range of responses to employee misconduct. Offenders may receive a verbal warning at first, then a written warning for subsequent violations, then suspension, and ultimately termination.

Most companies consider failure to punch in/out a minor violation of company policy/practice and first time offenders will be verbally warned. Second time offenders may receive written warnings. Depending upon company practice, offenders with three or more violations in a short period of time may be terminated.

Consider meeting with the employee, if you haven’t already, to discuss the issue. Maybe he has a legitimate reason for not clocking in/out. Even if so, his actions call for disciplinary action. Make sure the employee understands the requirement for him to clock in/out every shift and that continued violations will result in termination. Remember to document every infraction. It’s important to have evidence to prove termination is justified if the employee files for unemployment benefits.

August 1st, 2015, 7:14 PM |  Posted in: Termination |
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Pregnancy Discrimination Act

Hi. I am researching Georgia’s laws on pregnancy and was wondering what the difference between the federal Pregnancy Discrimination Act and Georgia’s Fair Employment Practices Act was? Both seem to state that you must treat pregnancy as you would any other short term disability. Why have a state law that only covers public employees that says the same thing as a federal law? And doesn’t the ADA not consider a normal pregnancy a disability? Thanks! Kendall

Hi Kendall,

The federal Pregnancy Discrimination Act (PDA) prohibits discrimination on the basis of pregnancy, childbirth or related medical conditions. Basically, as you state, a covered employer must treat women affected by pregnancy, childbirth, or related medical conditions in the same manner in all terms and conditions of employment as other applicants or employees with similar abilities or limitations. The PDA covers all aspects of employment, including firing, hiring, promotions, and fringe benefits (such as leave and health insurance benefits). .

The PDA is an amendment to Title VII of the Civil Rights Act which covers employers with 15 or more employees, including state and local governments.

The federal Americans with Disabilities Act (ADA) requires employers to provide reasonable accommodations to employees with covered disabilities unless doing so would cause an undue hardship, meaning a significant difficulty or expense.

Under the ADA, an individual is considered to have a disability if he has a physical or mental impairment that substantially limits one or more major life activities, has a record of such an impairment or is regarded as having such an impairment.

You’re correct in stating that pregnancy alone is not considered a covered disability under the ADA because it doesn’t meet part of the definition of a disability. However, complications resulting from pregnancy and childbirth, as well as conditions exacerbated by pregnancy and childbirth, may be considered impairments and may therefore be covered disabilities.

The Georgia Fair Employment Practices Act (FEPA) prohibits state agencies from discriminating against any individual on the basis of race, color, religion, national origin, sex, age, disability, or retaliation. Furthermore, the same leave benefits provided to employees with temporary disabilities must be provided to women disabled by pregnancy.

This law is comparable to several federal laws enforced by the federal Equal Employment Opportunity Commission (EEOC) including Title VII of the Civil Rights Act, Pregnancy Discrimination Act, Age Discrimination in Employment Act, and Americans with Disabilities Act. However, the major difference from Georgia’s FEPA is that these federal laws cover all employers with 15 or more employees, including state and local governments.

It’s very common for state laws to mirror federal laws. Doing so further encourages employers to obey the law and provides no gray area for misinterpretation of prohibited activities. Some states may adopt laws that pertain only to public employees in response to federal legislation or to address concerns mainly found in the public sector at the time. HTH!

July 29th, 2015, 9:20 PM |  Posted in: Labor Laws |
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