Hi! Does anyone know the rules on how paying commission works, and after how much money a salesperson is considered an employee and I would have to pay taxes and such? I am based in Canada and we will likely have Canadian and US salespeople and likely quite a few of them because we are going with a bit of a different idea. Commission is going to be a big part of our company and so we want to make sure we won't have the US/State/Canadian Government on us, looking for taxes and such. I know many of you guys will say find a lawyer, are there any online lawyer type guys that you guys use? I live in a small town and all the lawyers are old guys who know nothing about the internet and such.
In the US - an employee becomes an employee when the following conditions exist:
They have a set scheduled determined by you.
You provide work materials/uniforms...
something else? *I think those are the major factors at least*
And you can pay up to $599.99 without having to provide any tax papers to the salesperson. If you pay them $600 or more in a year, you will have to provide them AND the Internal Revenue Service with a 1099 form which will show how much they earned.
(There are other papers to file also as you're an out of country entity)
As a contracted worker, with no schedule and no materials other than your plan/company information, you shouldn't have to with-hold any taxes for them. Also you wouldn't have to provide unemployment insurance or anything of that nature.
Though you'll probably want to consult the IRS for more information. http://irs.gov
There are many ways that sales commissions are structured. Firstly, you should determine how you intend to hire your sales people - as contractors, part-time employees, full-time employees? This will make a major different on taxes. I think in the US this is determined by not just pay structure but number of hours worked.
A lot of companies who hire contractor-based sales people will pay higher commissions, and probably more frequently pay out (bi monthly perhaps). They might also pay an hourly rate or they might not. Other companies who hire sales personnel as full-time employees might pay a low salary and pay a commission on top of that for a certain volume of sales.
It's a nice idea to hire a business/sales consultant to determine the trends in your industry and help you right up a plan for this. You should then describe the final details in an employee handbook so the personnel know the structure. Hope this is helpful. Best of luck.
We are basically just going to partner with a few webdesigners and other friends from around the world and give them a commission for every hosting client they bring to us. So really they aren't fulltime unless they really want to go all out, and they aren't officially part time I guess until they reach a certain level and I am not sure if you would classify then as contractor based.....what would you guys do in this situation? If there is a lawyer out there that wants to help me out with this please PM me.
I have never been part of an affiliate program, is that basically what I was suggesting just a different name for it? I will take a look around at a few sites....I actually saw a company that gave $65 to a person for every customer they brought in....but we are kinda doing it different in that they will get paid a % for as long as the client is with us....