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I've Googled this question but I haven't found any exact details or reliable sources.

I'll keep this as broad as possible so the question isn't specific to my situation but I will answer any questions that are needed to give context if the answer depends on situation.

If a client were to pay a business $X for a service can the business pay the employees a percent of the clients payment if the employees only duties involve providing the service the client payed for?

I know that each employee would need to be paid minimum wage so if the minimum wage is $10 and they spend 10 hours providing the service the business would need to pay no less than $100.

I ask becuase not all contracts are even for a service based business. A small project could charge $2,000 and a large project may charge $6,000 but an employer may want to pay the employee more for that large project.

For example:

20 hours at the $10 rate would be $200 for that contract but if the employer could pay per project then the employer could pay something like $500 which would average out to $25/hour which may be too much for an employer to pay for smaller projects.

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If a client were to pay a business $X for a service can the business pay the employees a percent of the clients payment if the employees only duties involve providing the service the client payed for?

Generally speaking, the amount of money a business pays it's employees has nothing to do with the amount of money the business collects from contracts it makes.

Quite frankly any business that provides labor will charge more for that labor than they receive. Otherwise, there wouldn't be a business.


Now, if you are asking if a company is allowed to pay employees a percentage of a contract; then, yes, they can. However the amount of money must exceed minimum wage.

A business is also allowed to subcontract the work to non-employees such that they don't have to worry about minimum wage. In that case it's up to the subcontractor to determine if they are willing to work for the amount offered or not.

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You do not state where you are and employment law is jurisdiction specific.

In Australia at least the short answer is: yes, providing minimum standard of employment are met. Common examples include:

  • shearers who are paid by the sheep
  • manufacturing workers who are paid by the piece (piece work)
  • sales people who are paid commissions
  • couriers who are paid per delivery
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  • Oops. My mistake. Question has been edited to reflect that I am in the US – Memj Feb 11 '16 at 6:23
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Not a lawyer, don't have a business with employees.

Let's assume your employees are hourly non-exempt workers. Then you can set their base rate of pay equal to any amount at or over minimum wage and pay them any additional money you feel like, so long as your method of determining who gets the money isn't discriminatory against a protected class. You should be able to call it a bonus without any legal trouble. The method of calculation of the bonus is at your discretion and should be used as a tool to retain good employees. Note: you'd still need to comply with things like overtime pay, of course.

With salaried/exempt workers, I'm less sure the answer is yes, but I suppose this scenario could work: offer a base salary of around $30k (this gives you a little buffer) with merit bonuses. I would avoid making any representations about merit bonuses at this salary level since they would probably be larger than the base salary and representations could be construed as an offer of more money unless you have reason not to give it. You could double or triple that, depending on the local labor market, and then say something like "merit bonus of 20% for rank 1, 10% for rank 2, and none for ranks 3 and below". Microsoft does (or did when I was there) something similar. That way you're not committing to anything that, if forced to do, would be bad.

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