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Indiana Employment Law: When commissions and bonuses are treated as wages

Indiana Code § 22-2-9-1 defines "wages" as "all amounts at which the labor or service rendered is recompensed, whether the amount is fixed or ascertained on a time, task, piece, or commission basis, or in any other method of calculating such amount."

Commissions are also generally treated as "wages" within the meaning of the Wage Payment and Wage Claims statutes. When an employee leaves employment, the employer must pay the departing employee commissions that the employee has earned to the date of termination. Issues often arise as to whether a commission has been "earned" and whether an employee is entitled to trailing commissions. Therefore, it is important that the employer have a clearly stated policy or written agreement with the employee that explains how and when commissions are actually "earned."

Depending upon their purpose, bonuses may or may not be considered wages within the meaning of the Wage Payment and Wage Claims statutes. Absent an agreement to the contrary, an employer generally is not obligated to pay any part of a "discretionary" bonus to a departing employee. However, if the bonus is not discretionary, but is linked to time worked or the amount of work done, such a bonus likely will be considered wages and could result in a claim under the Wage Payment and Wage Claims statutes. Bear in mind that commissions and non-discretionary bonuses must also be included in calculating overtime.

What can you do if your employer failed to pay commissions that are owed? First, ask your employer why you haven’t received your commissions and document any reason the employer gives for not paying you. If the employer refuses to pay, you can file an Application for Wage Claim with the Indiana Department of Labor or consult an employment law attorney about your rights and how you should proceed. Employees who have been involuntarily separated from employment (laid off or fired) must file a wage claim with the Indiana Department of Labor before proceeding to file a civil lawsuit to recover wages. An employee who is still employed or separates from employment voluntarily (quits) may either file a wage claim or file a private lawsuit to seek recovery of wages. The Indiana wage claim form may be completed online at http://www.in.gov/dol/2734.htm, or by visiting the Indiana Department of Labor office.

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