Benefits And Compensation

Outdoors Gross sales Exemption 101


In case your group is rising proper now because the economic system comes again to life, it’s possible you’ll be contemplating increasing your gross sales power. Some organizations need to rent extra gross sales folks and will not already be aware of the surface gross sales exemption that’s a part of the suite of exemptions to time beyond regulation pay rules inside the Honest Labor Requirements Act (FLSA).


The Division of Labor (DOL) has a fact sheet outlining the small print for an worker to qualify for the surface gross sales exemption. It notes:

“To qualify for the surface gross sales worker exemption, the entire following checks should be met:

  • The worker’s major responsibility should be making gross sales (as outlined within the FLSA), or acquiring orders or contracts for providers or for the usage of amenities for which a consideration will probably be paid by the consumer or buyer; and
  • The worker should be usually and commonly engaged away from the employer’s place or locations of enterprise.

The wage necessities of the regulation don’t apply to the surface gross sales exemption.”

As you possibly can see, the necessities for this exemption are fairly clear: The worker should have a major responsibility of gross sales and should sometimes be exterior of the office to take action. The DOL stipulates that “sales” consists of any sale, alternate, contract to promote, consignment for gross sales, cargo on the market, or different disposition.

One of many largest causes employers wish to reap the benefits of this specific exemption for out of doors gross sales workers is that, in contrast to different FLSA exemptions, it has no wage foundation requirement.

That is what permits exterior gross sales representatives to be paid totally on fee, even when that fee quantity varies week to week and isn’t all the time constant. Not solely do those that qualify for the surface gross sales exemption not should be paid on a salaried foundation or minimal wage, however the exemption itself means they’re not required to be paid time beyond regulation both.

On condition that the hours labored by gross sales representatives can fluctuate considerably day after day and week to week, this can be a important benefit for employers as a result of it means hours labored don’t must be tracked.

Nonetheless, employers contemplating classifying workers as exterior gross sales representatives to reap the benefits of this specific exemption must be conscious that they need to meet the regulatory stipulations or danger going through main penalties for misclassification; a number of years of again pay and different penalties may apply in that case.

Different suggestions for employers trying to make the most of this exemption:

  • Communication with the worker, particularly proper at hiring, is critical to make sure the worker understands. On this scenario, workers will not be required to be paid time beyond regulation and even minimal wage. The fee they’re paid can fluctuate week to week or month to month and nonetheless meet the authorized necessities (even when some weeks, they’re paid lower than minimal wage), so long as they meet the stipulations of the exemption.
  • Take note of state and native legal guidelines that will have stricter pointers to comply with. Specifically, some states have particular restrictions on how a lot administrative work an out of doors gross sales consultant could be anticipated to do with out dropping the exemption.
  • Make sure the work is completed exterior of the first place of work. Restrict phone and Web work for that reason.
  • To scale back the danger of dropping the exemption, restrict different nonsales duties to those who instantly profit the gross sales perform of that particular particular person.

The primary purpose this exemption exists is as a result of it’s assumed (although not legally mandated) {that a} commission-based exterior gross sales place will probably be a extremely compensated place and thus not be vulnerable to not assembly minimal wage legal guidelines within the first place. Employers want to concentrate on this and guarantee they’re assembly the necessities.

Bridget Miller is a enterprise guide with a specialised MBA in Worldwide Economics and Administration, which offers a novel perspective on enterprise challenges. She’s been working within the company world for over 15 years, with expertise throughout a number of numerous departments together with HR, gross sales, advertising and marketing, IT, industrial growth, and coaching.

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