November 14, 2017

As a business owner, paying your employees accurately and in a timely manner is a top priority and an important legal obligation. It can be tempting – especially when times are tough – to delay staff payments or avoid paying terminated employees, but in doing so, you leave yourself open to costly lawsuits and potential fines. 

There are fourteen states in the U.S. and a handful of cities, who have set their own minimum wage rates that are higher than those at the federal level, and set by U.S. labor law. In general, employers must pay their employees the highest minimum wage that is designated by federal, state and local law.

Let’s look in more detail at what the law says about paying employees: 

The FLSA and its role in pay: 

The Fair Labor Standards Act is responsible for providing U.S. workers with a minimum wage, overtime pay and child labor regulations. Most, but not all, private and public sectors employees are covered by the FLSA, while certain employers and employees are exempt from coverage. 

The basic minimum wage that employers are required by the FLSA to pay their employees, was raised from $5.15 to $7.25 an hour, and all employees who are covered and non-exempt, must receive at least this amount. 

Employees who receives tips are not required to be paid the basic minimum wage, however, the cash wage they receive when added to their tips, must total at least the minimum amount of $7.25. 

With respect to overtime, the FLSA requires all employers to pay their covered, non-exempt staff who work more than 40 hours a week at a given job, at least time and a half. State and local government employees who are covered and non-exempt, are allowed by the FLSA to be awarded compensatory time off for all hours worked totalling more than 40 in a working week. This is also known as ‘comp time’ and is time off with pay in lieu of overtime pay. 

What’s the difference between salaries and hourly wages? 

Periodic salaries are usually paid irrespective of the number of hours an employee has worked, and hourly wages are self-explanatory. The distinction between the two was finalised and codified by the FLSA of 1938, and there became 5 categories that were deemed to be exempt from minimum wage and overtime protections, and were therefore made applicable to salaries: the categories involved were executive, administrative, professional, computer and outside sales employees.  

Salaries are usually set on a yearly basis, and these employees are required by law to be paid on a salary basis above a certain level, which may vary depending on the profession. For more detailed information about paying your employees, you are strongly advised to seek professional help and guidance to ensure that you comply with state, federal and local wage requirements.

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