Proper payroll classification means big things to your company
Most contracting companies employ salespeople to help solicit new business and help customers with existing orders.
However, there are two very different types of salespeople – inside and outside.
Outside salespeople are basically responsible for soliciting new business and new projects from existing customers. They primarily work outside of the place of business, frequently making sales calls and visiting clients.
Inside salespeople do just that…they work inside the place of business. They often help existing customers with add-on orders. They often help clients with existing projects or orders. If there are changes or additions that have to be made in the middle of the project, the inside salesperson could be responsible for those activities.
Inside and outside salespeople are also subject to different laws regarding compensation. Inside salespeople are subject to Federal and State* minimum wage and overtime laws. However, outside salespeople are exempt from the same minimum wage and overtime laws.
The problem comes when inside salespeople are misclassified as outside salespeople so companies do not have to submit to minimum wage and overtime laws. According the Federal and State laws, this is a crime and could result in harsh penalties.
Companies that have misclassified inside salespeople as outside salespeople in the past have received:
- Tax penalties
- Federal and State Fines
- Civil Lawsuits
- Back overtime pay mandates
Other companies could also refuse to do business with companies who abuse this, judging them as untrustworthy.
When classifying salespeople as inside versus outside, look at the amount of time they spend out of the place of business. Most states classify outside salespeople as spending at least 50% of their time outside of the place of business. Also, look at the specific duties they perform. When in doubt, seek professional advice from a lawyer to ensure compliance with these laws.
It is important to follow these laws closely as it will prevent costly fines and penalties as well as ill will from other companies.
*Please consult the laws regarding minimum wage and overtime for inside and outside salespeople in your individual state.