Overtime for commissioned techs: FLSA basics

Why this matters for service companies

Overtime is normal in the trades. BLS notes that electricians' schedules may include evenings and weekends and that overtime is common^[4], and most HVAC technicians work full time with some evening or weekend shifts^[5]. When those same techs earn commission or spiffs, the overtime calculation changes. Getting it wrong is a quiet, recurring error: it repeats every week a tech works more than 40 hours, and back-pay claims usually reach back across many pay periods.

Most mistakes come from treating overtime as time and a half on the base hourly rate alone. Once a tech earns any commission, that shortcut almost always underpays.

Rule 1: commissions belong in the regular rate

The regular rate includes all remuneration for employment except certain payments the law excludes, such as discretionary bonuses and gifts, and earnings may be on a commission basis as well as hourly^[1]. Overtime is owed for hours over 40 in a workweek at not less than one and a half times that regular rate^[1]. That includes percentage commissions on completed revenue, commissions on equipment sales and commission-like spiffs.

When the commission is paid weekly, it is added to the employee's other earnings for that workweek, the total is divided by total hours worked, and the employee is owed an additional half of that rate for each hour over the maximum hours standard^[2].

Worked examples

In Example A, a payroll system that paid time and a half only on the $28 base would add $70 for the five overtime hours instead of $100. The $30 gap looks small, but over a busy summer with many overtime weeks and a crew of techs, it adds up to a meaningful back-pay exposure. In Example B, the tech is paid only commission, so the straight-time pay is already covered and only the half-time premium is added.

How to test your own payroll

Run the same arithmetic on your own records. Pick a tech who worked more than 40 hours in a recent week and earned commission or a spiff. Add every straight-time payment for that week, divide by the hours on the timesheet, and halve the result to get the premium per overtime hour. Compare your figure with the overtime line on the actual pay stub. If the stub shows time and a half on the base rate only, the commission was left out of the regular rate. Repeat the test for a week with a spiff and a week with an on-call stipend, because those pay codes are often set up differently in payroll software.

Monthly and delayed commissions

Many companies pay commission monthly, or only after an invoice is collected. The regular-rate rule still applies: the commission belongs to the workweeks in which it was earned. In practice, payroll pays overtime on the hourly portion each week, then, when the commission is paid, works out the extra overtime owed for the weeks it covers and adds it to that paycheck. Use one documented allocation method, agreed with your payroll provider or adviser, rather than deciding case by case. Keep records of hours by week so the allocation can be done at all.

Rule 2: the 7(i) exemption is narrow

Section 7(i) of the FLSA gives an overtime exemption to some commissioned employees, but only when all three conditions are met: the employee works for a retail or service establishment; their regular rate exceeds one and one-half times the applicable minimum wage for every hour worked in a workweek in which they work overtime; and more than half of their total earnings in a representative period consist of commissions^[3]. The representative period must be at least one month and no more than one year^[3]. If any condition is not met, the exemption does not apply and overtime premium pay is owed^[3].

• Retail or service establishment: whether a contracting business counts is a fact-specific question, and installation or construction work makes it less clear. Get advice before relying on it.
• Rate test: checked every overtime week, not averaged over the month.
• Commission share: a tech paid mostly hourly with a small commission does not qualify.
• Records: you need to show the representative period and the earnings split if challenged.

Exempt and nonexempt: techs and office staff

Field technicians who are paid hourly or by commission are generally nonexempt and owed overtime. Salary alone does not make someone exempt: the white-collar exemptions depend on both pay level and duties. A service manager who mostly runs calls rather than managing people is unlikely to be exempt. Customer service representatives and dispatchers who book calls are nonexempt in most cases, so the same regular-rate rules apply to any booking bonus they earn; see hiring a CSR for pay set-ups that keep this simple.

Spiffs, bonuses and on-call pay

Commission is not the only pay that feeds the regular rate. Spiffs for selling a membership, production bonuses for finishing installs and attendance bonuses are usually promised in advance, so they are part of the regular rate in the weeks they cover. On-call stipends and call-out minimums can also count. The exclusions are narrow: genuinely discretionary bonuses, gifts on special occasions and a few other payments listed in the law^[1]. If payroll treats every bonus as excluded, the overtime premium will be too low every time a tech with a bonus works over 40 hours. Ask your payroll provider to show you, line by line, which pay codes are included in the regular rate and which are not.

Records to keep

• Daily start and finish times for every tech, including commissioned techs and crew members on production pay.
• The workweek definition: the day and time it starts, used consistently on every pay record.
• Commission statements that show which invoices were paid in which period.
• Spiff and bonus rules in writing, with the dates they were announced.
• For any 7(i) reliance: the representative period chosen and the split between commission and other pay for each employee.

States can add their own rules on top of the federal standard, such as daily overtime or different commission agreement requirements. Check your state labor department’s guidance whenever you operate across state lines.

Common mistakes and fixes

1. 01

   Overtime on base pay only

   Fix: compute the regular rate from all straight-time pay, including commission, for each workweek.

2. 02

   Averaging hours across a pay period

   Fix: averaging hours over two or more weeks is not permitted^[1], so calculate overtime per fixed 168-hour workweek, even on biweekly payroll.

3. 03

   Ignoring monthly commissions in overtime

   Fix: allocate the commission back to the weeks it covers and pay any extra overtime owed.

4. 04

   Assuming 7(i) applies

   Fix: check all three conditions and the establishment test with an adviser before using it.

5. 05

   Unrecorded hours for commissioned techs

   Fix: require clock-in and clock-out for every tech, every day.

6. 06

   Calling techs contractors to avoid overtime

   Fix: classify workers properly; see W-2 vs. 1099.

What to check this month

1. Pick three busy weeks and recompute overtime for every commissioned tech by hand.
2. Compare the result with what payroll paid and note any gap.
3. Ask your payroll provider exactly how commission and spiffs feed the regular rate.
4. Write down the workweek start day and time and use it everywhere.
5. Review the plan with an employment lawyer if you rely on 7(i) or pay commission monthly.

Average hourly earnings at specialty trade contractors reached $39.05 in September 2026^[6], so even a few overtime hours per tech per week are a material payroll line. Design the plan first with commission plan guardrails, then confirm the overtime math.