Employees are a huge part of what makes businesses so successful. Without them, depending on the business, very little would get done. Seeing as how employees work hard and help keep things running smoothly, employees are expected to pay them and keep on top of payroll. Whether they decide to handle payroll from within or outsource, it is their choice, but when it comes to compensating employees, things are expected to be done accurately and on time.
Here are a few compensation facts that all employers should be aware of when opening a new business.
Employee Classification
The Fair Labor Standards Act(FLSA) requires a number of things from business owners and companies. One of these requires is that every position at your company have a classification of exempt or non-exempt. What this means is that certain rules and regulations will need to be adhered to for certain employees. For example, there may be overtime or minimum wage requirements for a non-exempt employee, but not for an exempt employee.
Minimum Wage
Every state has a minimum wage require. According to FLSA, employees who are considered non-exempt have to be paid a minimum wage of $7.25 per hour, however, this is only if the state hasn’t mandated a higher minimum wage. In that case, employers are required to pay that amount per hour. This amount is something the employer is expected to keep track of, in case there are increases and they have to ensure their employees are being paid the correct amount.
Overtime
The FLSA requires employers to pay non-exempt employees an overtime rate of at least one and one-half times the employee’s regular rate of pay for every hour worked over 40 in a workweek. Again, state laws may differ, allowing additional overtime pay in certain cases, so be sure to look up the specific requirements that apply to your employees.
Employee or Independent Contractor
Not only are employers required to classify employees as exempt or non-exempt, they are expected to clarify if they are an employee or an independent contractor. An employee is someone the employer withholds taxes from when they issue their payment. An independent contractor does not have taxes withheld from their pay, but they are still required to pay them.
Pay Frequency
Every business owners has to establish when they will pay their employees. It is typically either every week, every other week, twice a week, or once a week.
Wage Garnishments
In certain situations, employers are required to deduct funds from an employee’s paycheck because they have a debt must be paid. It is something that is often court ordered and must be done when immediately, as there are penalties for employees when they fail to remit payment to the party owed.
It is necessary of all businesses to comply with payroll rules and regulations. Failing to do so will result in penalties and fines, which could greatly affect the business. Any employer who is unsure of payroll laws in their state, should consider doing their research.
