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Set up overtime pay for nonexempt commission employees

Some commissioned employees such as salon managers may or may not be exempt from overtime.

  • For employees with hourly pay + commission exceeding (typically) 1.5 times hourly pay, OT is exempt.

Else, OT is paid at the rate of hourly pay + commission amount.

  • Exempt employees are paid the sum of hourly pay and commission but hourly pay should be for no more than 40 hrs. For example, if the employee worked for 50 hours, they would still get hourly pay for 40 hours.

  • Non-exempt employees are paid using the following formula.

If

Commission + (Total Hours*Hourly Rate) > (Total Hours*Horly Rate * 1.5)

Then

Total pay = Commission + (Total Hours*Hourly Rate)

Else

(Total hours*Hourly rate)+Commission+(Total hours*Hourly rate+Commission/Total Hours)*0.5*OT hours

Consider this example.

A center manager with an hourly rate of $10, with 25% commission, worked for 45 hours in a week and earned $800 in service sales.

To calculate her payout:

Step 1: Eligible for OT ? - Yes

Step 2: Is [Hourly pay + Commission ($650.00) > Total hours * Base rate * 1.5 ($675)? ] - No

Step 3: Pay = X + (overtime hours * (X/total hours) * 0.5)

Pay = 650 + (5 * (650/45) * 0.5) = $686.10

Consider the following flowchart to understand how overtime pay for non-exempt employees is calculated; this is typically for salon managers.

httpsdownloadsintercomcdncomio26088084439e7ac85704408b70fdf332dhc_payroll_flowchart2png.png

To define whether a commissioned employee is exempt or not exempt from overtime, use the employee profile page.

To override payout for an employee:

  1. Ensure you are at the center level.

  2. Open an employee profile (Employee > Employees > Employees > Name of the employee > General tab).

  3. In the Job info section, for the setting Employee pay using hourly pay and service commission comparison, select Override at employee level.

    Note

    You can see this option only when center-level configuration is set to Based on employee overtime exemption.

  4. Select either one of the following options:

  5. Click Save.

    This particular employee is paid based on the settings you chose in her profile.

    httpsdownloadsintercomcdncomio260881264aad0a9b1715fb15c69d71d5bempprofile_overrideatemplevelpng.png

Note

New federal law — Tips and OT pay deduction (2025–2028)

Under the One Big Beautiful Bill Act (OBBBA), employees who earn $150,000 or less annually can claim federal tax deductions on certain income when filing their 2025 tax return. They can deduct:

  • Up to $12,500 in overtime wages, and

  • Up to $25,000 in tip income

These deductions apply to tax years 2025 through 2028.

This update does not change overtime calculations, payroll withholding, or payroll reporting in Zenoti. Employees will claim these deductions when filing their taxes.

Conditions apply

For OT exempt employees:

  • You can configure Overtime using the Weekly option (you cannot use the Multiplier option).

  • Pay-out type must be set to Hourly pay + Service commission (OT not eligible) in Hourly pay/Service commission report.

For OT eligible employees

  • You can configure Overtime using the Weekly option (you cannot use the Multiplier option).

  • Pay-out type must be set to either Hourly pay + Service commission (with Overtime) or Hourly pay + Service commission (No Overtime) in Hourly pay/Service commission report.

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