Payroll

Do I have to pay my employees for that?

Complicated nuances related to overtime rules and compensation for off-site office events are just a few complexities that cause confusion for business owners.

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Employees around the country look forward to receiving their paychecks on a regular basis – but rarely do they consider how they are paid.  Complicated nuances related to overtime rules, forms of payment and compensation for off-site office events are just a few complexities that cause small business owners to question, “Do I have to pay my employees for that?”

Here are some succinct answers to nagging questions that will help business owners better understand and address misconceptions about today’s pay practices.

Q: The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees for all “hours worked.” What does this include?

A: This includes all time spent on work activities during and after an employee’s scheduled shift.   It also includes time spent on other activities such as training, company events and travelling.

Q: When can employees waive their right to overtime pay?

A: Employees may not waive their right to overtime. If they don’t satisfy the tests for exemption, they must be classified as non-exempt and paid overtime whenever they work more than 40 hours in a work week.

Q: If an employee is terminated, should they receive payment on the regular pay day or another day?

A: Under federal law, a departing employee’s final paycheck must generally be provided by the next regular payday, but many states have implemented shorter timeframes for providing final pay.

Q: The practice of “working interviews” is becoming more common.  This is when a prospective employee spends time on the job before being offered a position to see if they are a good fit. Are there any requirements around pay for working interviews? Is it true that employers only need to begin payment when the prospective candidate is hired?

A: Actually, it’s a common misconception that candidates don’t require payment for working interviews. When interviewees spend a few hours or days embedded in a workplace environment, they get a real-world glimpse of what it might be like to report there every day, while interviewers can observe whether the potential employee would be a good fit for the role and their organization.  No matter how long the working interview lasts, the candidate must be paid for the time spent working.

Q: What about work-related injuries? Is an employer required to offer compensation for time spent seeking treatment?

A: Yes – if the employer encouraged the employee to seek treatment during normal working hours, the employer is required to pay for time spent waiting for and receiving medical attention.

Q: Are employers required to pay non-exempt employees for the time they spend in required training?

A: Yes. Under FLSA, training is considered directly related to the employee’s job if it is designed to help the employee handle his or her current job more effectively. In instances where all four of the following criteria are met, training time may be unpaid:

  • Attendance is outside of the employee’s regular working hours;
  • Attendance is voluntary;
  • The course, lecture, or meeting is not directly related to the employee’s job; and
  • The employee does not perform any productive work while attending the training.

Q: Are employers required to receive compensation for off-site, work-related events?

A: That depends. If the event is required or occurs during work hours, then yes, employees must be compensated for time spent at the event. However, if attendance is not required, nor is the event occurring during work hours, then compensation is not required.

These are just a few of many complexities employers face around compensation practices. Business owners are encouraged to consult their labor guidelines on a state-by-state basis and consider bringing in outside assistance as needed. Partnering with a third party can remove some of the administrative burden and allow business leaders to focus on what really matters: building their business.

Chris Rush is Division Vice President, Strategy, ADP Small Business Services 

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