HR for Small Businesses:Urgent Legal Matters

Presentation for Athens Area

Chamber of Commerce

Partnerships for Progress

Employee Vs. Independent Contractor

• Independent Contractor -- Payer controls the result of the work, not the process.

• Employee – Payer controls what and how the work will be done.

• Statutory EEs and Non EEs

Common Law Rules

• Behavioral – Does the company control how the work is done?

• Financial – Are certain business aspects controlled by the payer?

• Type of Relationship – Are there written contracts or employee type benefits?

Independent Contractor Taxes

1099 Worker

Hours worked 40Wage Rate 10.00$ Gross Wages 400.00$

Self Employment tax 15.30% 61.20$ Federal Income Tax (estimated) 10.00% 40.00$ State Income Tax (estimated) 6.00% 24.00$ Workers Compensation 3.00% 12.00$

Net Pay 262.80$

Employee Taxes

Employee

Hours worked 40Wage Rate 8.61$ Calculate this numberGross Wages 344.20$

FICA Social Security tax 6.20% 21.34$ FICA Medicare Tax tax 1.45% 4.99$ Federal Income Tax (estimated) 10.00% 34.42$ State Income Tax (estimated) 6.00% 20.65$ Workers Compensation 0.00% -$ Paid by the employer

Net Pay 262.80$ START HERE !

Employer Cost

Employer

Hours worked 40Wage Rate 8.61$ Gross Wages 344.20$

FICA Social Security tax 6.20% 21.34$ FICA Medicare Tax tax 1.45% 4.99$ FUTA (estimated) 0.60% 2.07$ SUTA (estimated) 2.70% 9.29$ Workers Compensation 3.00% 10.33$ Paid by the employer

TOTAL COST 392.22$

Major Provisions of FLSA

• Coverage• Recordkeeping• Overtime Pay • Minimum Wage• Youth Employment

Coverage

Two types of coverage• Enterprise coverage: If an enterprise is

covered, all employees of the enterprise are entitled to FLSA protections

• Individual coverage: Even if the enterprise is not covered, individual employees may be covered and entitled to FLSA protections

The Bottom Line

• Almost every employee in the United States is covered by the FLSA

• Examples of employees who may not be covered– Employees working for small construction

companies – Employees working for small independently owned retail or service businesses

Recordkeeping

Recordkeeping

•1. Employee's full name and social security number. •2. Address, including zip code. •3. Birth date, if younger than 19. •4. Sex and occupation. •5. Time and day of week when employee's workweek begins. •6. Hours worked each day. •7. Total hours worked each workweek. •8. Basis on which employee's wages are paid (e.g., "$9 per hour", "$440 a week", "piecework") •9. Regular hourly pay rate. •10. Total daily or weekly straight-time earnings. •11. Total overtime earnings for the workweek. •12. All additions to or deductions from the employee's wages. •13. Total wages paid each pay period. •14. Date of payment and the pay period covered by the payment.

Recordkeeping (example)

• DAY DATE IN OUT TOTAL HOURS • Sunday 6/3/07 -------- -------- ------------------- • Monday 6/4/07 8:00am 12:02pm • 1:00pm 5:03pm 8 • Tuesday 6/5/07 7:57am 11:58am • 1:00pm 5:00pm 8 • Wednesday 6/6/07 8:02am 12:10pm • 1:06pm 5:05pm 8 • Thursday 6/7/07 -------- -------- ------------------- • Friday 6/8/07 -------- -------- ------------------- • Saturday 6/9/07 -------- -------- ------------------- • Total Workweek Hours: 24

“White Collar” Exemptions

“White Collar” Exemptions

The most common FLSA minimum wage and overtime exemption -- often called the “541” or “white collar” exemption -- applies to certain• Executive Employees• Administrative Employees• Professional Employees• Outside Sales Employees• Computer Employees

Three Tests for Exemption

Salary Level

Salary Basis

Job Duties

Minimum Salary Level: $455

• For most employees, the minimum salary level required for exemption is $455 per week

• Must be paid “free and clear”• The $455 per week may be paid in equivalent

amounts for periods longer than one week– Biweekly: $910.00– Semimonthly: $985.83– Monthly: $1,971.66

Salary Basis Test

• Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis)

• The compensation cannot be reduced because of variations in the quality or quantity of the work performed

• Must be paid the full salary for any week in which the employee performs any work

• Need not be paid for any workweek when no work is performed

Executive Duties

• Primary duty is management of the enterprise or of a customarily recognized department or subdivision

• Customarily and regularly directs the work of two or more other employees

• Authority to hire or fire other employees or recommendations as to the hiring, firing, advancement, promotion or other change of status of other employees given particular weight

Administrative Duties

• Primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers

• Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance

Common Errors to Avoid

Common Errors to Avoid

• Assuming that all employees paid a salary are not due overtime

• Improperly applying an exemption• Failing to pay for all hours an employee is

“suffered or permitted” to work• Limiting the number of hours employees

are allowed to record

Common Errors to Avoid

• Failing to include all pay required to be included in calculating the regular rate for overtime

• Failing to add all hours worked in separate establishments for the same employer when calculating overtime due

Common Errors to Avoid

• Making improper deductions from wages that cut into the required minimum wage or overtime. Examples: shortages, drive-offs, damage, tools, and uniforms

• Treating an employee as an independent contractor

• Confusing Federal law and State law