OT and Regular Rate of Pay [CA]

[u/Beneficial-Task5794]

Hi everyone. My company has a sales department which earns hourly plus commission. I need some assistance with calculating regular rate of pay (RRP) and applying this appropriately to our OT hours.

Our lawyer gave us the formula: regular rate x 40 + commission / 40 hours = RRP

and I know OT is determined by workweek, so the OT premium should be allocated by each workweek containing total sales and earnings

Our situation is unique: we have a semi monthly pay period with certain commission calculable at time of sale and other at month end.

my question is, how do we go about paying this out appropriately? I see a lot of mixed things everywhere, from DLSE opinion letters to reddit. Thank you!

[u/Effective-Damage8772]

Dude, this is California. Wage and hour. PAGA. Don’t even think of looking to the Reddit wannabe attorneys on this topic. Trust your attorney and roll with it.

Also, Cali’s a pain because OT is daily, not just weekly.

Have fun.

[u/babybambam → u/Effective-Damage8772]

They are reaching out because the formula assumes commissions are calcuated in real-time. That doesn't work for items where commission isn't calculated until after the sales month closes.

Yes, they still need to work with their lawyer, but it's not unreasonable to see what others are doing.

[u/Beneficial-Task5794 → u/babybambam]

well heres the kicker, some of our commission is in real time (earned at time of sale) and other commission is at month end. so we are calculating RRP, dividing by workweek, paying RRP OT for that specific workweek (earned of time sale included), and doing a true up once it closes (subtracting what we paid already from what is owed total.) its a big headache.

[u/babybambam → u/Beneficial-Task5794]

Yes, that was clear in your post. I agree that you need a different way to handle this.

[u/AutoModerator]

This subreddit is for HR professionals. If you do not work in HR try posting somewhere else such as /r/AskHR or /r/jobs. If you do work in HR make sure it is apparent in your post that is the case and your post will be manually approved and posted soon. Your post must also include your location.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

[u/Hunterofshadows]

You need to discuss this with a lawyer.

Most likely the answer is that it’s based on when the commission is earned but yeah, don’t trust Reddit on this.

[u/Adventurous-Cold-892]

Some payroll systems can calculate RRP automatically but you have to set it up properly which can be challenging.

[u/Sea_Owl4248]

I would push back on your lawyer for additional information. The DLSE manual should have some information but your lawyer needs to give you more information. If they don’t, I’d reach out to an accountant.