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Are You in Compliance With Federal and State Wage and Hour Laws?

Do all of your employees receive a salary? Are you certain that they all should be paid a salary? Why are you paying employees salaries instead of a per hour wage? The US Department of Labor sets specific guidelines on when to pay employees a salary and when to pay them by the hour. Are you familiar with these guidelines?

The Fair Labor Standards Act (FLSA) was enacted in 1938. It established a federal minimum wage, time and one half overtime and prohibited employment of minors. Unless an employee is exempt from this act, they must receive at least minimum wage for hours worked and received time and one half for hours worked over 40 in a week (168 consecutive hours). The current federal minimum wage is $7.25 per hour. Each state also sets a minimum wage. Employers must pay the higher of the two wages. Currently in the state of Florida, the minimum wage is $7.31 per hour. January 1, 2012 the Florida minimum wage increases to $7.67 per hour.

Who is exempt from overtime? Again, this is not determined by employers, the FLSA sets specific guidelines for these exemptions. The categories for exemptions are executive, administrative, professional, computer and outside sales.

Executive Exemption:
1. Employee is paid at least $455 per week
2. Primary duty is to manage the business or a recognized department
3. Customarily directs the work of two or more employees; includes the authority to     hire, fire, make recommendations that carry particular weight regarding employment status.

Administrative Exemption:
1. Employee is paid at least $455 per week
2. Primary activities are performing non-manual office work on matters of significance to the management or business operations of the firm or its customers which requires the exercise of discretion and independent judgment

Professional/Creative Exemption:
1. Employee is paid at least $455 per week.
2. Employee who primarily performs work requiring advanced knowledge/education and which includes consistent exercise of discretion and independent judgment.
3. The advanced knowledge must be in a field of science or learning acquired in a prolonged course of specialized intellectual instruction. Creative professionals perform work requiring invention, imagination, originality and/or talent in a field of artistic endeavor.

Computer Professional:
1. Employee is paid at least $455 per week or $27.63 per hour
2. Employee who primarily performs work as a computer systems analyst, programmer, software engineer or similarly skilled work in the computer field performing a) application of systems analysis techniques and procedures; b) design, development, documentation, analysis, creation, testing or modification of computer systems or programs; or c) design, documentation, testing, creation or modification of computer programs based on and related to user or system design specifications.

Outside Sales:
1. Does not have to make at least $455 per week
2. Employee performs sales work off the company’s premises and whose primary duties include making sales or obtaining order or contracts for services or for the use of facilities for which the client or customer pays.
3. The employee is customarily and regularly away from the company’s place of business while performing such duties.

If you are paying your employees a salary and they do not meet the criteria in one of the exemptions, then you do not meet the guidelines set forth by the FLSA and could be subject to fines and penalties. I strongly encourage you to audit your payroll to ensure that you meet these requirements. The Department of Labor is cracking down on small businesses in this area, please don’t be caught.

FICA wage base increases to $110,100 for 2012

FICA will increase to $110,100 in 2012. The wage base for 2011 is $106,800. This will effect 10 million tax payers in the US. Note that with the exception of pretax medical and tax free fringe benefits, there is no cap for Medicare.

Employees who are collecting social security and working at the same time are still required to pay FICA and Medicare taxes on their pay. This is a common question often asked.