Employee wages and hours are important issues that must be addressed by all businesses. There are state and federal laws in place that govern workplace wages and hours.
But these laws have changed over time, and many business owners don’t fully understand them.
The laws define the regulation of employees and independent contractors, as well as exemption status and bonuses provided to employees. Understanding these laws ensures that your business complies with all regulations and avoids unwanted legal issues.
A Common Wage and Hour Issue in the Workplace
Employers must work to avoid common issues related to employee wages and hours.
Minimum wage violations occur when employers fail to provide the adequate level of pay within the accurate time period required by law.
Overtime and training wages must be applied according to the state and federal regulations while considering the exemption classifications of employees.
Other wage and hour issues consist of deductions made from tips or compensation paid in other goods such as meals.
Employees who work outside of their designated work hours must be paid accordingly. Otherwise, an employer may be found in violation of the law.
Wage and hour laws establish standards within a wide range of industries. Most regulations exist under the Fair Labor Standards Act (FLSA), which establishes the federal regulations for employers.
Employees vs. Independent Contractors
Employers must consider whether workers are employees or independent contractors. This is especially important as more businesses choose to utilize independent contractors in place of hiring employees.
The trend toward hiring independent contractors over employees has led to an increase in the potential for wage and hours violations because employers often fail to properly classify workers. When this happens, it is a costly mistake.
This classification is based on the established relationship between the business and its workers. Workers classified as employees are eligible to receive overtime pay along with unemployment and workers’ compensation benefits.
Proper classification of employees and independent contractors will also impact aspects such as tax withholdings and social security contributions.
Exempt vs. Nonexempt Employees
Classifying employees as exempt or nonexempt is another important issue that businesses must address when attempting to comply with wage and hour law. The employer must first conduct the analysis to determine whether an employee can be considered exempt vs non-exempt.
The FLSA classifies some employees as being exempt from overtime requirements. These include individuals who are in administrative, executive and outside sales positions.
Employees who are considered nonexempt are fully entitled to receiving pay for overtime work.
Along with the type of work an employee provides, other factors such as the amount of pay and the means by which an employee is paid also determine their exemption classification.
Those employees who fall under the exempt classification earn a minimum of $23,600 each year and are compensated through a salary.
Production vs. Discretionary Bonus Pay
Wage and hour laws also relate to bonuses provided to employees. Generally, there are two types of bonus plans offered by employers; discretionary bonuses and production bonuses.
Production bonuses are those provided in exchange for the delivery of a specific measure of work units.
Discretionary bonuses are determined by the employer and given at the end of the designated time period.
Businesses often violate laws related to production bonuses by not including it in their evaluation of overtime pay.
In summation, workplace wage and hour laws are important for businesses to understand. Complying with the state and federal laws pertaining to these important aspects of the workplace ensures that businesses avoid costly and time-consuming penalties and litigation.
Classifying workers properly and providing overtime pay, bonuses, and other benefits in accordance with those classifications supports the long-term satisfaction of workers and the value they provide to your business.