HR Solutions: Compensation issues present stout challenges for employers

One of the largest financial issues for most companies involves payroll. No one wants to overpay staff and waste money or underpay and face huge fines. The Fair Labor Standards Act is a federal law dictating payroll practices and is enforced by the Wage and Hour Division of the Department of Labor. Understanding the regulation will assist in the avoidance of common traps.

All positions must first be properly classified as exempt or nonexempt. Exempt jobs remain exempt from minimum wage and overtime requirements. Exempt positions include executive, professional, outside sales and administrative.

A careful review of the Fair Labor Standards Act should be made when determining exempt status due to the narrow definitions. For example, Department of Labor investigators often find exempt positions to be nonexempt if the words assistant, coordinator or leader appear in the job titles.

For nonexempt occupations, at least minimum wage must be paid for every hour worked. No less than 1.5 times the regular rate must be paid after 40 hours of work in a seven-day workweek. Breaks or meal periods over 30 minutes may be unpaid. However, if the time is not consecutive or the associate is not completely relieved of his duties, the enterprise is liable for the time.

Travel time must be paid for if it takes place during regular working hours, even if it occurs on a day normally not considered a work day.

Training time is compensable unless it is completely voluntary, not directly related to the employee's existing job, occurs outside regular working hours and does not result in productive work benefiting the employer. One exception is available when the training is related to the staff member's existing job. The training time may be noncompensable if the training is voluntary, initiated by the worker, outside regular working hours and taught by an independent school, college or trade institution.

An exempt position will often be referred to by businesses as salaried because even if the team member works 80 hours, he receives the same pay as if he worked 40. The intent of the law includes the opposite, too. If he works less than the 40 hours, he receives the same salary. However, a few exceptions remain.

If an employee is on military, witness, jury or Family and Medical Leave Act leave and performs no work that week, no pay is required. Organizations with bona fide sickness and disability plans may deduct absences due to illness in full-day increments following the usage of all sick days. Half-day increments will be allowed if the sickness is covered by the act.

Several myths remain prevalent for both exempt and nonexempt positions. The Fair Labor Standards Act does not mandate vacation, sick, holiday or severance pay; meal or rest periods; holidays off or vacations; premium pay for weekend or holiday work; pay raises or fringe benefits; or immediate payment of final wages to terminated employees.

The act includes some exceptions based upon industry and position, so be sure to review the law prior to making payroll decisions. For example, institutions providing in-house care of the physically or mentally ill may adopt agreements with staff and use a 14-day overtime period instead of the seven-day overtime period. The organization will then pay overtime for hours worked after eight per day or 80 in the 14-day workweek, whichever is the greater number of overtime hours.

In addition, state laws must be complied with if a business employs team members in states other than Missouri. These laws might impose further requirements, so make a careful review of them.