News & Articles

Self-Audit Program May Help Employers Correct Wage Errors

Posted on Wed, May 09, 2018

Eligible employers may now be able to conduct a self-audit of certain wage practices, thanks to a pilot program from the Department of Labor's Wage and Hour Division (WHD). This program — called Payroll Audit Independent Determination (PAID) — was recently launched as a tool for employers to uncover payroll errors on their own. Employers who use the PAID program and discover that they've underpaid some employees can correct their payment errors and coordinate with WHD to avoid penalties.

As a reminder, the Labor Department can pursue administrative solutions or, if necessary, court action to recover back wages when employees have been underpaid. "Violations may result in civil or criminal action, and employers may be assessed civil money penalties of up to $1,100 for each willful or repeated violation of the minimum wage or overtime pay provisions of the law," according to the Labor Department. The ability to avoid such penalties should prompt employers to seek answers and correct their own errors.

Who's Eligible?

To be eligible to use the PAID program, the following must be true:

    • Neither WHD nor a court of law has found within the last five years that your company has violated the minimum wage or overtime requirements under the Fair Labor Standards Act (FLSA) by engaging in the same compensation practices at issue in this proposed self-audit.
    • Your company isn't currently a party to any litigation (private or with WHD) asserting that the compensation practices at issue in the proposed self-audit violate FLSA minimum wage or overtime requirements.
    • WHD isn't currently investigating the compensation practices at issue in the proposed self-audit.
    • You have no specific knowledge of recent complaints by your employees or their representatives made to you, your representatives, WHD or a state wage enforcement agency regarding the compensation practices at issue in the proposed self-audit which violate FLSA minimum wage or overtime requirements.

Important note: This is only a partial list.

To become certified to participate in this program, you'll first need to read through information about the FLSA (called a "compliance assistance review") and PAID on the WHD website (https://www.dol.gov/whd/paid/). This information includes videos and links to WHD webpages that explain overtime pay requirements and who's exempt from overtime eligibility. Also available is an explanation of exemptions for executives, administrative employees, highly compensated employees, computer employees and outside salespeople.

Recordkeeping Requirements

The PAID program provides a list of FLSA recordkeeping requirements to properly document your payroll. This resource specifies which records you must keep and for how long.

Once you've completed the "compliance assistance review," gather the following information to conduct your self-audit:

    • Potential violations that may have occurred in the last two years,
    • Employees that may have been affected in the same period, and
    • Specific timeframes during that period in which each employee was affected.

After you've identified these elements, calculate the amount of back wages owed to each employee.

If a self-audit reveals that your company owes back wages to some employees, simply paying the amounts due before reporting the issue to the WHD doesn't mean that those employees have forfeited their rights to take you to court. Why? In this scenario, WHD didn't supervise the process of the determining the amounts owed, so the agency might still weigh in.

Required Data

When your self-audit is complete, supply the following data to the nearest WHD office:

    • The names, addresses and phone numbers of all affected employees,
    • Your back-wage estimates along with supporting evidence and methodology used to make those calculations,
    • Payroll records and any other relevant evidence,
    • Records demonstrating hours of work for each affected employee during the time frame at issue,
    • Records to show that you have corrected the compensation practices to comply with the FLSA,
    • Concise explanation of the scope of the potential violations for possible inclusion in a release of liability,
    • A certification that you've reviewed the PAID program's information, terms and compliance assistance materials, and
    • A certification that your company meets all eligibility criteria of the PAID program.

The Waiting Game

What happens after you've submitted all the required paperwork? You're not off the hook until WHD says so. But, according to the PAID program's description, "If WHD accepts you into PAID, WHD will provide you with the proposed scope of the release of liability for the potential violations presented."

Specifically, WHD will tell you how much it thinks you owe employees who were underpaid (which might be exactly what you already determined), and supply "settlement terms for each employee, which employees may sign to receive payment." Once you've paid all back wages due by the end of the next full pay period and provided proof to the WHD that you have done so expeditiously, then you're done.

Consult with a labor attorney before deciding to participate in the PAID program to ensure that you aren't overlooking any potential legal hazards in doing so.

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Tags: Department of Labor, Payroll, Taxes

Survey: Employers Adapt Quickly to Withholding Tax Changes

Posted on Wed, Mar 14, 2018

Most employers had no problems meeting the February 15, 2018, deadline to begin using the 2018 federal income tax withholding tables, which reflect changes made by the Tax Cuts and Jobs Act (TCJA). However, many employees question how the TCJA will affect them.

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Tags: Payroll, Tax Cuts and Jobs Act (TCJA)

Federal Contractors Get a Minimum Wage Increase in 2018

Posted on Wed, Sep 27, 2017

The U.S. Department of Labor's Wage and Hour Division (WHD) has announced that the minimum wage rate for federal contractors will increase from $10.20 per hour to $10.35 per hour, effective January 1, 2018.

Background Information

On February 12, 2014, President Obama signed Executive Order 13658 which established a minimum wage rate for federal contractors. The executive order required parties who contract with the federal government to pay workers performing work on or in connection with covered federal contracts at least:

$10.10 per hour beginning January 1, 2015; and

    • An amount determined by the Secretary of Labor in accordance with the methodology in the executive order, beginning January 1, 2016, and annually thereafter. The rate was increased to $10.15 per hour, effective January 1, 2016 and $10.20, effective January 1, 2017.

Tipped Employees

The executive order also requires annual adjustments to the minimum cash wage rate for tipped federal contract employees. The WHD has announced that the minimum cash wage for tipped employees performing work on or in connection with a federal contract will increase from $6.80 per hour to $7.25 per hour, effective January 1, 2018.

The contractor must increase the cash wage paid to a tipped employee to make up the difference if a worker's tips combined with the required cash wage of at least $7.25 per hour don't equal the hourly minimum wage rate for contractors as noted above. Certain other conditions must also be met.

Minimum Wage for Other Employees

The minimum wage amount  listed above is only for federal contractor employees. Under the Fair Labor Standards Act (FLSA), the federal minimum wage for covered non-exempt employees who aren't employed by federal contractors is $7.25 per hour. Many states and municipalities also have their own minimum wage laws. If your business operates in a state or municipality that has a higher minimum wage than the federal level, your employees are entitled to the highest rate.

What Employers in Some States Must Pay

Some examples of states with minimum wage per-hour rates currently higher than the federal rate are Washington ($11.00), Massachusetts ($11.00), Oregon ($10.25), Connecticut ($10.10), Vermont ($10.00), Arizona ($10.00), Rhode Island ($9.60), New York ($9.70), Colorado ($9.30), Maryland ($9.25), Maine ($9.00), Michigan ($8.90), West Virginia ($8.75),South Dakota ($8.65), New Jersey ($8.44), Illinois ($8.25), Florida ($8.10) and New Mexico ($7.50).

Some states have different minimum wage rates for large and small employers and impose other requirements. For example:

  • In California, the minimum wage is $10.00 for employers with less than 25 employees and $10.50 for those with 26 or more.
  • Large employers in Minnesota (defined as enterprises with annual receipts of $500,000 or more) have a minimum wage rate of $9.50 per hour while small employers (enterprises with annual receipts of less than $500,000) have a minimum wage rate of $7.75 per hour.

  • In Ohio, employers with annual gross receipts of $299,000 or more must pay $8.15 per hour and those with annual gross receipts under $299,000 must pay $7.25 per hour.

  • In Nebraska, employers with four or more employees have a minimum wage of $9.00 per hour.
  • Nevada requires employers that provide no health insurance benefits to pay $8.25 per hour and employers that do provide health insurance benefits to pay $7.25 per hour.

Federal and State Tipped Employee Rules

An employer of a tipped employee is required to pay $2.13 an hour in direct wages if:

  • That amount plus the tips received equals at least the federal minimum wage,

  • The employee retains all tips and the employee customarily, and

  • The employee regularly receives more than $30 a month in tips.

Many states also have their own laws related to tipped employees. Again, if an employee is subject to both federal and state laws, he or she is entitled to the law that provides the greater benefits. Some states (including California, Oregon, Nevada, Montana, Minnesota and Alaska) require employees to pay tipped employees the full state minimum wage.

Contact your EHTC Payroll Advisor if you have questions about minimum wage issues in your situation.

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Tags: Minimum Wage, Payroll

Shave Payroll Costs for Shared Employees

Posted on Fri, Jul 17, 2015

If you run your business operations through two or more corporations, the different entities may share some of the same employees. In that case, you can save payroll taxes by using a "common paymaster."

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Tags: EHTC Article, Employers, Newsletter, Payroll, shared employees

Answers to Questions about Wage Garnishment

Posted on Wed, Oct 22, 2014

More than one in ten working Americans between the ages of 35 and 44 had their wages garnished in 2013, according to a recent study performed by payroll service company ADP. Many people associate wage garnishment with "deadbeat dads" who owe spousal and child support. But ADP's study found that many debtors were delinquent on taxes, credit cards, medical bills and student loans -- not support payments.

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Tags: EHTC Article, Employers, Income, Wage Garnishment, Newsletter, Articles, Payroll, Taxes, Employees