Employee pay methods

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Employee pay methods

 

FiPayMethod

 

Employee compensation can become extremely complex in modern service businesses. MLS 2026 was designed to support a wide range of payroll methods so that businesses can create compensation plans that match their actual operations.

Some employees may be paid:

hourly

salary

flat rate

commission

draw

incentive bonuses

or combinations of these methods

MLS 2026 supports:

👉 any combination of payment calculation methods

for an individual employee.

This flexibility allows the system to handle:

technicians

managers

sales personnel

support staff

hybrid compensation systems

with considerable accuracy.


Accessing Pay Methods

All compensation setup is performed on the:

👉 Pay Methods tab

within:

👉 Employee → Edit

The values entered here determine:

how payroll is calculated

what rates are used

how commissions are computed

how overtime is handled

how incentive pay is applied

⚠️ Because payroll calculations depend directly on this information, setup should always be reviewed carefully.


Hourly Pay

Some employees are compensated based on:

👉 actual hours worked

Enter the employee’s:

hourly wage rate

in the Hourly Pay field.

Example:

$25.00 per hour

If hourly compensation is not used:

leave the field blank

Hourly pay is commonly used for:

clerical staff

support employees

service advisors

general labor personnel


Overtime and Doubletime

U.S. federal labor laws generally require overtime pay when employees exceed:

40 hours per week

The standard overtime rate is usually:

👉 150% of normal pay

(1.50 multiplier)

Under some circumstances:

👉 Doubletime

(200% or 2.00 multiplier)

may also apply.


Overtime Setup

Two values are required:

Pay factor

(typically 1.50)

Base hours before overtime begins

(typically 40)

Example:

1.50 after 40 hours


Doubletime Setup

Doubletime uses the same structure:

multiplier

threshold hours

If your company does NOT use doubletime:

⚠️ enter the same values used for standard overtime.

This prevents unexpected calculation behavior.


Salary

The Salary field contains:

👉 the annual salary amount

This method is commonly used for:

owners

managers

executives

salaried personnel

However, salary may also be combined with:

commissions

bonuses

incentives

Example:

A sales manager might receive:

$12,000 annual base salary

plus

parts sales commissions

The system calculates both automatically.


Employee Type

MLS 2026 classifies employees into five categories.

⚠️ Important:

These categories affect:

identification

reporting

General Ledger assignment

—but NOT payroll calculations directly.


Employee Type Codes

M — Management

Owners, executives, and management personnel.

Usually compensated by:

salary

draw

profit participation


S — Support

Employees who support operations but do not generate billable labor.

Examples:

supervisors

parts managers

service writers


T — Technical

Employees generating billable labor.

Examples:

technicians

diagnostic specialists

production supervisors


C — Clerical

Office and administrative personnel.

Examples:

secretaries

bookkeeping staff

reception personnel


L — Labor

General labor and shop support personnel.

Examples:

detailers

drivers

maintenance staff


Commission Pay

MLS 2026 can calculate commissions based on:

parts sales

labor sales

or both

The system totals all qualifying sales for the employee and applies:

the commission percentage

after subtracting any specified:

👉 base amount


Understanding the Base ("Over") Amount

The:

👉 Over field

represents:

the amount subtracted from total sales

before commission is calculated.

Example:

Base sales requirement = $5,000

Total sales = $7,000

Commission basis = $2,000

If no commission percentage is entered:

⚠️ no commission will be calculated.


Flat Rate / Service Unit Pay

Many repair facilities compensate technicians using:

👉 Flat Rate Pay

Under this method:

labor operations are assigned billable units

employees are paid per unit completed

Example:

Job time = 1.2 units

Pay rate = $20.00 per unit

Payroll calculation:

1.2 × $20.00 = $24.00 pay

Flat rate systems are common because they:

reward productivity

improve efficiency

simplify labor costing


Incentive Pay

MLS 2026 supports:

👉 graduated incentive pay systems

for high-production technicians.

The system analyzes:

total units completed during the pay period

and applies bonus rates above specified thresholds.


Example Incentive Structure

Units Completed

Bonus Added

Over 40

+ $1.00/unit

Over 50

+ $1.50/unit

Over 60

+ $2.00/unit

Over 70

+ $2.50/unit


Example Calculation

If a technician completes:

63 units

with:

base rate = $18.00/unit

MLS 2026 calculates:

40 units @ $18.00

10 units @ $19.00

10 units @ $19.50

3 units @ $20.00

The next pay period recalculates independently.


Important Productivity Warning

⚠️ Incentive systems can improve productivity dramatically.

However:

quality control policies are essential

Technicians rushing work to maximize bonuses may create:

comebacks

customer dissatisfaction

warranty losses

A strong comeback policy is highly recommended.


Draw Per Year

Some employees are compensated using:

👉 annual draw systems

This is common for:

sales personnel

management

commission-based employees

Enter:

annual draw amount

Optionally specify:

hours included in the draw period

If employees receive:

additional hourly compensation beyond the draw

enter:

excess hourly rate

MLS 2026 then calculates:

base draw

plus

excess hour compensation

automatically.


Calculation Methodology

MLS 2026 automatically analyzes which compensation categories apply to the employee.

The system can combine:

hourly pay

commissions

flat rate

salary

incentives

overtime

draw systems

into a single payroll calculation.

This allows businesses to create extremely flexible compensation plans while still maintaining:

accurate payroll

proper accounting

complete reporting


Why Proper Setup Matters

Compensation setup directly affects:

payroll checks

taxes

commissions

productivity reporting

labor costing

profitability analysis

Incorrect setup can lead to:

inaccurate payroll

overpayments

underpayments

reporting problems

employee disputes

Careful setup and periodic review are strongly recommended.


Recommended Best Practices

When configuring employee compensation:

Keep pay structures simple when possible

Document all compensation agreements clearly

Verify commission percentages carefully

Review incentive structures regularly

Monitor comeback and warranty trends

Audit payroll calculations periodically


Recommended Companion Sections

This section works closely with:

Payroll Overview

Employee Setup Overview

Employee Withholding and Deductions

Payroll Processing

Costing Setup

Payroll Reports

Payroll Troubleshooting

Together, these sections provide a complete employee compensation and payroll management workflow within MLS 2026.