Awareness of Overtime Pay Issues Helps Protect Your Business
The economic recession, with the downward trend in business activity, has caused most businesses to reduce employment levels significantly, including layoffs.
Now, as the economic activity picks up, there is a need to look at increasing those levels again. That usually begins by increasing the scheduled work hours for existing employees.
The next step, before increasing the number of workers on the payroll, is to ask existing employees to work overtime. However, before taking that step, the business owner needs to make sure to completely understand the government's rules regarding overtime pay. A slip-up could cost extra dollars.
Under the Fair Labor Standards Act (FLSA) administered by the U.S. Department of Labor's Wage and Hour Division, hourly employees must be paid overtime at time-and-a-half for working more than 40 hours in a work week. Overtime pay may not be waived by any agreement between the business and its workers.
Over the past several years, the federal government has stepped up enforcement of wage and hour laws regarding overtime. Particular scrutiny falls on thousands of what the Department of Labor (DOL) considers "low-wage" businesses, such as day-care centers, restaurants, janitorial services, health care facilities, motels and temp services.
Yet among small businesses, there remains a great deal of confusion about the rules of overtime pay. In general, federal wage and hour rules apply to any business with at least two employees and/or $500,000 in revenues. But there are exceptions, as well as state guidelines that may also apply.
One potential pitfall involves salaries for work weeks of more than 40 hours. According to DOL, a fixed salary for a regular work week longer than 40 hours does not eliminate an employer's obligation to pay overtime. Under federal rules, however, employers can exempt certain positions from overtime regulations.
These "white collar" exemptions include executives and professionals who spend at least 80 percent of their time on duties involving their own independent discretion and unstructured work. Federal law does not require extra pay for weekend or night work, nor is there any provision for double-time pay. Both are matters of agreement between you and your employees.
Firms that specialize in doing payroll processing for other firms agree that classifying employees as either exempt or nonexempt is neither exact nor easy. The decision shouldn't be based simply on job title or whether someone is hourly or salaried. Instead, job duties should be the main factor.
Overtime is just one of the many important FLSA topics covered at the Wage and Hour Division's website, www.wagehour.dol.gov. You'll also find valuable information on minimum wages, family and medical leave, definitions of full- and part-time workers and those whose income includes tips, applicable exemptions and a guide to applicable state-level requirements.
To learn more about small business employment issues, contact SCORE, America's free and confidential source of small business mentoring and coaching. SCORE is a nationwide nonprofit association of experienced business people who provide free, confidential business counseling to small business owners.
The Sandhills chapter is active in counseling, mentoring and presenting free business seminars. If you wish to speak to SCORE about your business, please register as a client by entering your information at www.edmisscore.org/0364, and one of our counselors will contact you.
In addition to counseling by appointment, the Sandhills chapter of SCORE has drop-in service, for those who have registered, from 10 a.m. to noon Tuesdays and Fridays at the Moore County Chamber of Commerce building on U.S. 15-501 in Southern Pines. The phone number is (910) 692-3926.
The chapter is currently expanding these activities and is seeking additional volunteers.
More information on SCORE's counseling activity can be found at the Sandhills SCORE website, www.sandhillsscore.org.
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