When my employees get sales commission in the middle of the month, can I hold off the payment until regular payroll?
Before I provide a recommendation, I am wondering if there is a compensation clause in each of the employee contracts addressing this matter. Any existing contract you have with your employees regarding compensation, especially in terms of commissions, if stated would dictate how often you should be paying your employees.
If the contract with your employees does not include compensation details related to commissions then frequency of payment would be at your discretion. If you are wondering if there is any specific state or national law governing how frequently brokers must pay their agents, no such law exists.
For your situation, it all depends on the legal language in the employee contracts. So, I would advise you to review those contracts.
Keep in mind that the industry standard for brokers to pay their real estate agents is typically as soon as the check is received from the buyer or seller of the real estate transaction or within three to five business days.
I understand that from an administrative stand point it would be easier to just pay each agent on a set date each month. However, I'm assuming you submitted your question because your employees may have complained about how often they get paid their commissions? There is value in keeping your employees happy, especially your top-performers, and paying them consistent with the rest of the industry.
I don't know all of the details of your specific business situation but sometimes if the cost is minimal, you have to make a business decision to keep employee morale high.
Ryan Himmel, CPA and registered securities analyst, is the founder and CEO of BIDaWIZ.com, a professional network for small businesses and entrepreneurs to obtain trusted advice and services from a team of CPAs, Enrolled Agents, Financial Planners & Tax Attorneys. His team provides answers to the many finance and tax questions that small businesses encounter every day. Ryan has been quoted in The Wall Street Journal, Forbes, Fox Business and Crain's New York, among other publications. Ryan also regularly contributes to the community with his finance and tax blog.