Spiff Payment Law

California Labor Law requires that when non-discretionary bonuses, incentives, commissions, and spiffs are granted to non-exempt (i.e., hourly) employees, the amount of the bonus is included in the calculation of the hourly rate to determine overtime pay. It is common knowledge that if an employee works more than 40 hours a week, you will have to pay that employee an hour and a half of their salary for all those overtime hours. Many of you also pay your hourly employees a spiff, commission, or bonus for a benefit base you`ve set up for the same employees. The “Pay and Hours Act” also requires you to pay one and a half hours for any additional wages (spiffs, commissions or bonuses) for any employee who works more than 40 hours per week. Often, you set up a program for your counter (or other departments) that, if they achieve a goal of increasing sales, improving gross margin, or reducing overtime, pay a premium for that performance. Last month, the U.S. Department of Labor (DOL) gave auto dealers good news. In a statement letter on the interpretation of the Federal Fair Labour Standards Act (FSL), the DOL noted that incentive payments made directly by the manufacturer to dealer sales advisors – commonly referred to as “spiffs” – can be used to meet a distributor`s minimum wage obligations. In 1936, Rex Stout used the word in Nero Wolfe`s “The Red Box” (chapter 3): “He stopped and smiled from Wolfe to me and again like a haberdashery trying to sell an old number with a big swing on it.” This employee took possession of the cards of former employees, changed her PIN and changed the billing addresses so that the debit card statements could be sent to her home address. She then made hundreds of online bank transfer payments from the company`s bank accounts to numerous debit cards, which she used to make personal expenses. The latest DOL op-ed is good news for auto dealers looking at sales compensation in light of the current economy and the COVID-19 pandemic. If you want to update your sales payment plans, think about how you can use the manufacturer`s spiffs to your advantage.

If an employee`s income is miscalculated because the overtime rate has not been adjusted to account for incentives, commissions, spiffs and non-discretionary bonuses, we can go back 4 years and recover all of your lost salary, as well as interest, penalties and attorneys` fees. While merchants should be happy that spiffs can count towards sales advisors` minimum wage requirements, you should remember the impact elsewhere. Under the RSA, vendors are exempt from overtime pay, but not all dealer employees are exempt. You should review federal and state payroll laws and determine whether non-exempt employees who receive incentives from the manufacturer are also eligible for overtime bonuses on those payments. When using SPIFFS, the main recommendations are to use them for short periods of time as incentives to drive units or margins in fast dollars. Then use money or something that sellers really enjoy or think is “chic,” like an iPhone or gadget that “must have” as a reward. The context here is well known to most car dealerships. The DOL looked at several dealers whose sales advisors received direct payments from automakers under incentive programs to sell certain vehicles or meet specific sales targets. While incentive programs were established by manufacturers, they were adopted by dealers who were aware of the terms and conditions of the programs and communicated them to their employees. In 1947, it was reported that Spiffs were awards given to employees who sold a particularly large amount of electrical appliances. [4] In particular, the DOL considered a recent federal appeal that concluded that the courts should consider the following three factors in determining whether third-party payments can be considered wages: (1) whether the specific requirements for receiving payments are known to employees in advance; (2) if the payment is made for a reasonably specified amount; and (3) whether the employer`s facilitation of payment is more than just an impact. The exception to this rule is that if you have an outside seller who spends 50% of their time outdoors, they are exempt.

The only other people who can be exempted are: anyone who pays more than 50% of their weekly salary in commissions, bonuses or spiffs. These positions would fall under the federal wages and hours provision, which is called Rule 7(I). Importantly, the DOL clarified that spiffs do not need to be explicitly mentioned in a written wage plan to be applied to the concessionaire`s minimum wage obligations. Instead, payments may be “implicitly” part of the employment contract, depending on the parties` previous practices. Nevertheless, your dealer can circumvent any arguments about what the parties have agreed on or disagree on by simply modifying existing sales wage plans to determine that the manufacturer`s incentive payments are considered wages to ensure that sales consultants receive at least the minimum wage for all hours worked. The Oxford English Dictionary suggests that (apart from a falsification of the specific) it could be associated with the use of the word at that time to refer to a dandy or someone who is elegantly dressed (so chic and spicy – to enhance the appearance of a place or person), but no one seems to have been able to: untangle the threads that came first, or what influenced what, or where the word originally came from. [1] [3] Most of the time, you`ll see SPIFF in capital letters to avoid confusion with the word “Spiff,” which means to beautify or tidy. While manufacturers established program terms and made payments directly to employees, distributors took advantage of the manufacturer`s payments to meet dealers` minimum wage obligations under the RSA.