Payroll, Wage, Hour and Labor Requirements

  • Posted by Michael Beauchemin on Wed, Feb 20, 2013 @ 06:20 PM

    From the HR Pros at Richard A. Beauchemin, CPA/Carolina Accounting & Tax Service, PLLC

    Federal, state and local laws require employers comply with all labor laws and including those governing compliance to wage and hour laws.  Wage and hour requirements apply to all employers regardless of size.  Failure to comply can result in litigation brought forth by employees or agency investigations.  Critical to compliance is understanding the fundamentals of wage and hour requirements.  Here are some basic requirements for compliance but in no way a complete list.

    Minimum Wage Requirements

    All employees must make minimum wage.  Because the state and federal minimum wage limits can differ, an employer must pay the highest minimum wage whether that is the state minimum  or federal minimum wage.  If an employee earns tips, an employer can pay less than the minimum wage; however, the tips plus the wages must meet or exceed the minimum wage.

    Overtime Requirements

    The seven day “work week” must be specified for overtime calculations.  You cannot vary the pay period or work week to avoid paying overtime hours.

    Overtime must be calculated and paid correctly based on the “regular” rate of pay.

    Because overtime calculations can vary between federal and state requirements, you will have to make sure you conform to the daily/weekly overtime requirements for both federal and state laws governing overtime pay.

    You are not required to pay exempt employees overtime, however they must meet the definition of an exempt employee under the Fair labor Standards Act (FLSA) and your states relevant requirements.  You will want to familiarize with the overtime exemption criteria and remember that simply because an employee is paid on a salaried basis does not automatically disqualify the employee from entitlement to overtime compensation.

    Employee Time Tracking

    Accurate time tracking and time reporting records are important.  Train non-exempt staff and supervisory personnel on the requirements to accurately complete time reporting records such as time sheets.

    An alternative to hand written time sheets and time reporting data, is an Employee Time and Attendance systems.  A Time and Attendance system, allows you to accurately track employee hours.

    In addition to providing you with access to electronic database that stores employee time records, they offer a significant Return on Investment (ROI).  It is not uncommon for even a small company with fewer than 25 employees to be able to save thousands of dollars per year.

    An electronic timekeeping where you can run labor reports with custom dates, allow you can match time records to payroll reports.  This is a life saver when responding to an agency’s investigation or litigation for violation of wage laws.

    Secure and maintain signed timesheets for all non-exempt employees verifying their hours worked for at least three years.

    Pay Requirements

    Make sure that any state specific requirements for “Direct Deposit” are followed if you provide “Direct Deposit”

    Many companies are moving toward a paperless payroll, using “Direct Deposit” and giving employees access to a web portal to view their paystub and W2.  If you intend to move towards a paperless payroll, make sure you conform to your state’s requirements.

    Any non-standard deductions to paychecks such as uniform expenses, expenses for tools, etc. need to be authorized in writing by employees and are in conformance with your state’s wage and hour regulations.

    Employee Classification

    Federal and state agencies are examining closely how employers classify workers with an increased emphasis on employers that use 1099 workers.  Make sure you properly classify workers as either W2 employees or 1099 workers in accordance to IRS and your state requirements.  Failure to comply can result in large penalties and you owing back taxes for payroll taxes not paid if workers are reclassified from 1099 contractors to employees.

    Critical to the success of a company is compliance to all federal, state and local laws.  Although we often focus on tax compliance, labor laws as well wage and hour compliance is equally important. To assist you we have a number of guides and resources available.  Our Resource Library page includes a list with descriptions of each.  On the page is clickable link to request any guide or checklist available.  All information is available at no charge.