Paying Employee Commissions
(Red Deer, Alberta)
Bookkeeping for hair stylists can be complicated
This question needs an answer. Do you know the answer? Please share your knowledge!
I really need your help! Payroll is driving me crAzy!
I've spent endless hours online searching for the answers and I just think I have it all figured out and then a new question pops up in regard to paying an employee commission (ie: hair stylist). Here goes...
Hypothetically, the stylist receives 65% of their sales (services), 10% of product sales, and 100% of tips.
Do I use the amount BEFORE gst when calculating the commission pay for sales?
I do know that employee income from tips and product sales is subject to source deductions. But then there's vacation pay! I understand that tips are exempt, but I just wanted to make sure that the product sales are too?
I think the answer is that commission is calculated on the net amount (not including gst) and that vacation pay is not paid on tips or product sales. Is that correct?
Thank you so so much for maintaining this helpful site! I'm glad I found you and very highly recommend it!
I don't know the answer to your question(s) without doing some research ... so I'm going to post this in the hopes some payroll gurus will be able to answer faster than I can at the present time.
You mentioned that you had done some online research already. Could you post back with any references you've already located so I'm not covering the same ground as you? I would truly appreciate it.
Okay, just thinking this through out loud. The words employee commission
says to me that the stylist is an employee not self-employed.
Also, GST/HST are monies collected on behalf of the government. The business owner is just a trustee
. Therefore, it wouldn't make sense to me to include sales tax when calculating employee commissions.
I don't know the anwser to your question about vacation pay, product sales and tips without doing some research. As you said, the answer doesn't just pop anywhere.
Here are general references relating to hairdressers that I've located. They don't answer your question but they may be useful to other readers. I haven't researched vacation pay yet as it is different in every province.
CRA has a very good reference page for barbers and hairdressers. You can find it at Businesses> Payroll> Calculating deductions> Special situations> Barbers and hairdressers
. The Tax Guy
(blog.taxresource.ca) also blogged about Can a Hairdresser Claim Tradesperson Deductions?
in March 2010.