Don’t let these 5 common payroll mistakes take your pot of gold!
1. Misclassification: Employee vs. Independent Contractor
Perhaps the most common audit issue today is misclassifying workers. There’s incentive to treat workers as independent contractors rather than employees because payroll taxes and employee benefit costs are high.
You don’t have the freedom to select the label for the worker; classification depends on whether you have sufficient control over the worker. This essentially means having the right to say when, where, and how the work gets done.
Find information about worker classification from the IRS. When in doubt, consult your tax advisor.
2. “All our employees are exempt, we pay them a salary”.
Paying someone a weekly salary does not make that employee exempt.
Remember-job titles alone do not determine the exempt or non-exempt status of any employee. Exemptions are determined for each specific employment situation based on the specific job duties performed and compensation received.
3. Allowing employees to work off the clock.
The U.S. Department of Labor and the courts do not recognize the concept of voluntary overtime without proper overtime pay. Agreements by employees to give up their rights to minimum wage and overtime pay are void and unenforceable.
Employees generally may not volunteer to perform work without the employer having to count the time as hours worked. Examples include:
- Rework: When an employee must correct mistakes in his or her work, the time must be treated as hours worked, even when the employee voluntarily does the rework.
- Waiting for Work: Time, which an employee is required to be at work or allowed to work for his or her employer, is hours worked. Is the employee “engaged to wait” or “waiting to be engaged?”
- Place of Work: Hours worked include all the time during which an employee is required or allowed to perform work for an employer, regardless of where the work is done, whether on the employer's site, at home or at some other location.
- Working during Lunch: Lunch breaks aren’t breaks if your employees work during the break.
4. Deducting money from pay without written authorization.
Other than court-ordered garnishments and deductions that are either required or specifically authorized under laws or regulations, all wage deductions should be authorized by the employee
5. Loaning money, advancing wages, or paying wages without maintaining clear, written documentation of the transaction.
Banks do not loan or advance money without a signed, written agreement for repayment and neither should an employer. If loans or wage advances are to be repaid via wage deductions, obtain written authorization for the deductions, specifying amounts and intervals, and do not forget to provide for deduction of any remaining balance at the time of a work separation. Never pay wages in cash without getting a signed, written receipt from the employee.
Love is in the air, chocolate, love notes, cards and flowers. But do your employees love you? Do they still love their job?
Employees value work/life balance and overall happiness over high salaries and perceived performance success. Taking the following five actions can help to ensure that your employees continue to be content with you and their job.
Conduct Frequent “Stay Interviews”
While exit interviews are often stressed, “stay interviews” can actually help you to spot ways to improve your workplace before employees leave. It’s important that the right questions are asked during these interviews and employees feel safe answering honestly. The best way to conduct “stay interviews” may vary depending on the workplace culture, but options include passing out random surveys periodically, allowing surveys to be submitted online through a service like Survey Monkey, or having non-biased third parties conduct the interviews. If that isn’t in your budget, your supervisors, managers, or even HR can conduct the informal check ins.
Questions that may help employers to understand employee’s pain points and improve contentment levels include:
- What do you love about your job?
- What would your ideal job look like?
- What do you dislike about your job and how would you change it?
- How could your managers make your job more enjoyable?
Now more than ever, employees are leaving jobs for other positions that allow better work/life balance-even if those positions offer the same or less pay. Scheduling flexibility, publishing schedules in advance, and allowing employees to work remotely can all help your employees enjoy a better work/life balance.
Offer Benefits and Perks
Businesses may vary in the kind of benefits and perks that they can offer, unlike larger corporations, small businesses can offer more personalized perks. Paid time off, health insurance options, and employee incentive trips are definitely attractive options, but free lunches and snacks, and company outings may also help to show the love.
Display Leadership-and Appreciation
When employees feel that they are doing all of the work while managers sit back and watch, they often become resentful and unengaged. Employees are much more likely to respect managers that lead than managers that dictate. A simple “Great job,” can go a very long way towards helping employees feel valued and appreciated.
Make Advancement and Learning Opportunities Clear and Attainable
While employees often leave jobs because of issues with managers or employers, employees usually won’t stay if they do not love their job-even if they love their manager. For employees to feel fulfilled, it’s important to make sure that advancement opportunities are available and attainable and even if there is no opportunity for promotion, that there are learning opportunities.
Larger corporations have an advantage because they have more positions and paths, but smaller businesses can stress the importance of an individual’s efforts to the growth and development of the business. Even the smallest raises and job title changes can help employees to feel that they are progressing and making a difference.
- OSHA poster
- EEO is the Law
- Employee Right for Workers with Disabilities
- Your Rights Under the FMLA
- Your Rights under the Uniformed Services Employment & Reemployment Rights Act (USERRA)
- Employee Polygraph Protection Act (EPPA)
Your business is growing! Yay! But wait.....
The growth phase of a small business can be both exciting and scary. It’s exciting because your business is growing. This is awesome! Except that you’re so busy you have to turn down new work and clients. You’re not able to do it all by yourself or with the current team you have. Sure, you could take on more business if you had more help. It seems logical to grow your team so you can grow your business.
You know deep down you need help but you start second guessing if it’s really the right thing to do. You think to yourself…
- How do I find the right person?
- Do I even have time to look for someone and go through the hiring process?
- Will it be easier if I just do it myself than have to hire and train someone?
Relax. Everyone goes through this when their business grows, so how do overcome the fear of hiring?
#1 Keep It Simple
Don’t overcomplicate the process. Put together a few check points in place of how you’re going to tackle taking on a new person and then just do it.
#2 Prepare a Job Description
Write a brief job description and make sure you’re working on it over a period of time so you have a clear understanding of what you want and need this new person to do. It doesn’t have to be a complex description. Bullet points are fine.
#3 Check References
Checking references is critical in making the final decision between candidates. Reference checks can reveal information that not only can help you determine your top choice but also can help you better understand how the new employee might transition in to the new role and your company
#4 Learn to Delegate
Develop your skills so you’re able to delegate. You need to be able to trust this new person so you don’t end up micro managing.
#5 Leverage the Probation Period
Many employers wait until the end of a probation period to assess if they’re ready to take someone on long term. The problem is, by that time it’s too late, use this time to your advantage by being proactive. Schedule regular “check ins” so you can gauge their progression. Again, keep it simple. Keep it short and sweet. Check that they know what they’re supposed to be doing and have an opportunity to ask questions. Create an environment where they’re comfortable asking questions and pay attention to the questions they ask.
By using the probation period to assess your new employee regularly, you’ll be able to tell if it’s going in the right direction for you and for them. Monitor changes in yourself during their probation period as well. Are you able to work better because they take more responsibilities off your hands? Are you still maintaining the same level of service? If the answer is yes, you know you’re in the right direction. It’s also helpful to set goals or targets for this person during their trial period. See how they’re able to adapt and reach these targets throughout their probation, instead of at the end when it’s too late.
Today the U.S. Department of Labor (DOL) released new rules dramatically increasing the new minimum salary level for the executive, administrative, and professional employee exemptions (salaried employees) under the Fair Labor Standards Act (FLSA) to $913 per week, or $47,476 per year. This new salary threshold—which will become effective on December 1, 2016—more than doubles the current minimum salary level of $455 per week, or $23,660 per year, and will have a dramatic impact on employers.
The new salary requirements will apply to the salaried employees you have in executive, administrative, and professional exemptions. Employees who do not meet the new salary requirements (those who do not make at least $913 weekly) when the final regulations become effective will no longer qualify for one of these exemptions, which means they will have to be paid overtime compensation when they work more than 40 hours in a workweek.
Other major highlights from the final regulations include the following:
- Increase to the total annual compensation requirement for highly compensated employees from $100,000 to $134,004 per year.
- Future automatic updates to the above thresholds will occur every three years, beginning January 1, 2020.
- The salary basis test is amended to allow the use of nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
The final regulations will become effective on Thursday, December 1, 2016.
How Can Organizations Prepare?
Determine Who Needs to Be Reclassified
Employees who are currently classified as overtime-exempt (salaried) may need to be reclassified as nonexempt under the new regulations, especially if they:
- Earn less than $50,000 a year
- Hold the same position occupied by many other employees in the company; or
- Work in jobs as accountants, assistant managers, sales and sales support workers, help desk employees, customer service representatives, technicians and business analysts.
Develop a New Compensation Plan for Reclassified Employees
Employers should compare the cost of giving raises to employees who are currently exempt but make less than $50,000 per year against the cost of reclassifying those employees as nonexempt and paying them overtime, given the number of hours those employees are currently working. Another option is a cost-neutral solution under which hourly pay is set at a rate will result in the same weekly compensation as the formerly exempt employee’s salary. This only works if an employer can accurately estimate how many hours per week a reclassified employee will work.
Review Wage and Hour Policies and Processes
If exempt employees are reclassified as nonexempt, it is crucial to implement timekeeping processes. The time worked by nonexempt employees must be accurately tracked and documented. Employers should also adopt policies on unauthorized overtime work, meal and rest breaks, travel time and mobile device usage.
Employers should develop a strategy for communicating any changes in classifications, policies or procedures to employees. Identify who will deliver the news, when the news will be delivered, and the format in which the news will be delivered.
Train the Reclassified Employees and Their Managers
You might have employees who have been exempt forever, and all of a sudden you have to start tracking their time, or managers who never managed hourly employees. Supervisors and managers need to know what constitutes "working time", and employees need to know what the company’s policy is regarding overtime.
Fact sheets and other materials to help employers and workers understand how the rule will affect them and the broader economy are available dol.gov/overtime.