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Auto Dealerships: Overtime Rules and Payroll Compliance (2026)
Overtime in auto dealerships is time and one half after 40 hours on the regular rate, and the regular rate has to absorb front-end and back-end commission structures and flat-rate tech pay before the premium is applied. BEG runs auto dealership payroll for $45 per employee per month inside the payroll software you already use, all-inclusive, live in 3 to 5 business days.
The overtime rules that apply to auto dealerships
Section 13(b)(10)(A) of the FLSA exempts salesmen, partsmen and mechanics who are primarily engaged in selling or servicing automobiles, trucks or farm implements at a nonmanufacturing dealership from overtime pay, but not from minimum wage. The exemption applies regardless of the dealership's annual dollar volume of sales.
A commissioned employee of a retail or service establishment is exempt from overtime under section 7(i) only if the regular rate of pay is more than one and one-half times the applicable minimum wage and more than half of compensation for a representative period of not less than one month is commissions on goods or services.
The FLSA does not require weekly pay, but the dealer must set a regular pay period, and a commission settlement period is presumed to be that pay period. Draws against commission paid within the pay or settlement period may be less than the minimum wage, and the employer may credit those draws against its minimum wage obligation when settling the amount due at the end of the period.
A worked example at auto dealership wages
Automotive service technicians and mechanics at the May 2025 national median of $50,620 earn about $24 an hour on a 2,080-hour year. Ten overtime hours in a week cost $365 at time and one half. If that week also carried front-end and back-end commission structures, the amount folds into the regular rate first and the premium rises with it; leaving it out is the most common overtime error in this industry.
How the payroll is set up to get it right
Each pay component is flagged at setup as included in or excluded from the regular rate, hours are captured by workweek rather than pay period, and any industry exemption is applied per employee with the supporting record kept. Overtime is then arithmetic, not judgment, on every run.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Section 13(b)(10)(A) of the FLSA exempts salesmen, partsmen and mechanics who are primarily engaged in selling or servicing automobiles, trucks or farm implements at a nonmanufacturing dealership from overtime pay, but not from minimum wage. The exemption applies regardless of the dealership's annual dollar volume of sales. [29 CFR 779.372]
- A commissioned employee of a retail or service establishment is exempt from overtime under section 7(i) only if the regular rate of pay is more than one and one-half times the applicable minimum wage and more than half of compensation for a representative period of not less than one month is commissions on goods or services. [29 CFR 779.412]
- The FLSA does not require weekly pay, but the dealer must set a regular pay period, and a commission settlement period is presumed to be that pay period. Draws against commission paid within the pay or settlement period may be less than the minimum wage, and the employer may credit those draws against its minimum wage obligation when settling the amount due at the end of the period. [DOL Fact Sheet #11]
Read the full guide to how to calculate overtime pay, and the rest of the auto dealership payroll library.
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Frequently Asked Questions
Which auto dealership employees are exempt from overtime?
Section 13(b)(10)(A) of the FLSA exempts salesmen, partsmen and mechanics who are primarily engaged in selling or servicing automobiles, trucks or farm implements at a nonmanufacturing dealership from overtime pay, but not from minimum wage. The exemption applies regardless of the dealership's annual dollar volume of sales.
How is overtime calculated on front-end and back-end commission structures?
front-end and back-end commission structures is added to the week's straight-time pay, the total is divided by hours worked to get the regular rate, and the half-time premium is paid on that rate for every hour over 40. A commissioned employee of a retail or service establishment is exempt from overtime under section 7(i) only if the regular rate of pay is more than one and one-half times the applicable minimum wage and more than half of compensation for a representative period of not less than one month is commissions on goods or services.
What does an overtime hour cost at auto dealership wages?
At the BLS May 2025 national median for automotive service technicians and mechanics, $50,620 a year or about $24 an hour, an overtime hour is $37 before any bonus or differential is added to the rate.
What does managed payroll cost for an auto dealership?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Front-end and back-end commission structures, flat-rate tech pay and F&I chargebacks are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Auto Dealerships. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Overtime Pay Under the FLSA
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