Every company should perform wage and hour audits periodically; minimally once a year, twice if possible. It is easier to catch and correct errors yourself than to risk discovery from employees or in the event of a DOL audit, and mistakes do happen. To remain compliant with wage and hour regulations it helps to have the appropriate checks in place, such as up to date written policies and procedures, periodic training for supervisors and managers, effective complaint mechanisms should be in place and a regular audit process should be established.
Wage and hour violations are not only costly from the standpoint of back pay and penalties but can also lead to serious employee relations issues if employees feel they are not being fairly compensated. Below, we present just a few of the many wage and hour potholes of which you should beware.
Many missteps can occur regarding overtime pay, here are a few:
- Misclassifying workers as ‘Exempt’ from overtime;
- not paying ‘unapproved’ overtime;
- failing to count all hours worked including pre and post work activities;
- failing to count certain activities as work time including working through a break;
- checking emails or performing other duties during time off; and
- travel time and meeting and training attendance.
Bonus or commission payments to nonexempt employees may impact overtime pay. A bonus should be included in the calculation of the regular rate of pay for the weeks which the bonus is earned. This will increase the overtime rate for these weeks. The weeks for which the bonus is earned includes all weeks covered by the bonus period. For example, if it is a quarterly bonus then all weeks in the quarter will apply.
Another consideration for computing overtime pay is when an employee works two or more jobs with different hourly rates at one or more facilities for the same employer in the same workweek. The employer must use the weighted average of the rates to compute the employee’s regular rate of pay for the purpose of calculating overtime pay.
Exemption Status / Salary Basis Test
Do you examine the duties of your salaried employees and not just their titles or how they are paid in determining whether they are exempt? Your exempt employees must pass one of the FLSA exemption tests in order to be exempt from being paid overtime. These exemption tests are based on actual worked performed, and do not test based upon the job title nor what is written in the job description.
For a job to remain exempt it must pass the Salary Basis Test which ensures that improper deductions to exempt employee’s salary are not made. There are very specific rules to follow when making any deductions to an exempt employee’s salary. Also a job that is exempt can lose exempt status when the duties and responsibilities change due to things such as staff reductions or organizational changes. Therefore it is advisable to retest jobs that are impacted by these types of changes.
Meal and rest period compliance
Many state wage and hour laws require employers to provide their employees with meal and/or rest breaks. These laws specify the circumstances under which such breaks must be compensated. In some cases, state laws impose different requirements than does FLSA.
A few more potholes worth mentioning
We have mentioned just a few of the many potholes HR professionals need to be aware when classifying jobs as exempt or nonexempt, overtime pay calculation and rest period compliance. Here are a few more you should keep in mind:
- failing to pay employees on day of termination;
- failure to follow rules for On-Call pay;
- improper use of ‘Comp Time’; and
- unlawful deductions from employee paychecks.
Of course, you should always consult your federal and state wage and hour resources and/or your wage and hour counsel to ensure a thorough and correct understanding of wage and hour rules.
Remaining compliant with wage and hour regulations is an important task that Human Resources and Compensation performs for an organization. Another important task they perform is to ensure fair and competitive pay practices. For the good of your employees, it is helpful to analyze benefits survey data, compensation surveys and salary reports. Having this information at hand allows you to plan a budget, including competitive employee salaries and benefits, which will help you to hire and retain a happy, talented team.
At WageWatch, our expert evaluators provide businesses in a large range of industries with accurate and beneficial benefits survey data, compensation surveys and salary reports to ensure that payment and benefits plans are on par with those in the industry. For more information on market compensation data, please call WageWatch at 888-330-9243 or contact us online (https://www.wagewatch.com/Contact/ContactUs.aspx).