Essentials of New Legislation and Payroll
New legislation and regulations are creating more challenges for businesses each year, and an increasing number of these affect payroll and hours tracking. The Fair Labor Standards Act, Affordable Care Act, and California’s impending Healthy Workplaces, Healthy Families Act of 2014 highlight the need for businesses to organize their workforces with payroll management software.
Fair Labor Standards Act
Originally enacted in 1938 and updated most recently by Presidential memorandum in early 2014, the FLSA sets guidelines for a wide variety of labor related issues. These include minimum wage, overtime, and child labor. It has been amended to include “equal pay for equal work” standards, prohibition of age discrimination, and a host of other updates. Recent changes are placing a greater burden on employers–financially, punitively through fines, and in documentation requirements. We will not dissect the requirements of all these areas. Instead, we will focus on the administrative and book-keeping aspects. For more complete information, visit the Department of Labor website.
Keeping detailed records helps with compliance and in defense of a labor dispute. The FLSA requires employers to keep records on wages, hours, and other items, as specified in Department of Labor (DOL) recordkeeping regulations. The records do not have to be kept in any particular form and time clocks are not legally required. With respect to an employee subject to the minimum wage provisions or both the minimum wage and overtime pay provisions, the following records must be kept;
- Personal information, including employee’s name, home address, occupation, sex, and birth date if under 19 years of age
- Hour and day when workweek begins
- Total hours worked each workday and each workweek
- Total daily or weekly straight-time earnings
- Regular hourly pay rate for any week when overtime is worked
- Total overtime pay for the workweek
- Deductions from or additions to wages
- Total wages paid each pay period; and
- Date of payment and pay period covered.
Records required for exempt employees differ from nonexempt. Special information is required for employees working under uncommon pay arrangements, home workers, employees to whom lodging is provided, and those receiving remedial education.
The Wage and Hours Division’s (WHD) enforcement of the FLSA is carried out by investigators stationed across the country. They have the authority to penalize businesses for non-compliance. Make sure your company is playing fair and avoids these potentially crippling fines.
Affordable Care Act
The Affordable Care Act is creating a succession of regulations which demand compliance. Simply declaring someone as a part-time or full-time employee is not enough. Businesses need to firmly establish whether an employee meets those criteria, and determine their eligibility for employer provided health care.
Full-time Versus Part-time
One of these criteria is the average number of hours worked on a weekly basis. For purposes of the Employer Shared Responsibility provisions, an employee is full-time for a calendar month if he or she averages at least 30 hours of service per week. Under the final regulations, for purposes of determining full-time employee status, 130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week.
Exceeding this threshold defines an employee as full-time and eligible for employer provided health benefits. Salaried employees are not exempt from these regulations, meaning to protect the business, those should be tracked as well. For each employee, businesses will need to show the total hours worked by week and calculate the averages. Think you’ve got it figured out? Those “hours of service” also must include other paid time, such as vacation, holidays, and jury duty, and unpaid time like medical leave, military leave, or unpaid jury duty.
Healthy Workplaces, Healthy Families Act of 2014 (California–AB1552)
Effective July, 2015, California businesses will be required to provide paid sick leave, even to part-time employees. Though California is a frontrunner in US bureaucracy, Connecticut already has similar legislation and several other states are sure to follow. No matter where you do business, you can expect time tracking and payroll regulations to continue this trend.
What Does This Mean For Employers?
While AB 1552 applies only to California businesses, similar laws are in the works in other states. The following are guidelines and we will ignore the topic of sick time usage. There are several exceptions to this legislation—most of whom are groups which have collectively bargained their terms. Please refer to California law for more complete details.
- Full time, part time, exempt, and temporary employees who work at least thirty hour per week will earn paid sick leave at a minimum rate of one sick hour for every thirty hours worked.
- Individuals begin accruing sick time after 30 calendar days of employment.
- Individuals must be employed at least 90 days before they may use any paid sick leave.
- Employers can cap unused sick time at six days (48 hours).
- Employers may limit the use of paid sick time to three days (24 hours) per year.
- Employers must allow unused sick leave to carry over to the following year, but may still limit usage to three days in one calendar year. This allows employees who get sick in January, for example, to use the time they have already earned.
- If an employer chooses to distribute three or more sick days in a lump-sum at the beginning of the year, no carry over is required.
- Employers who already exceed these accrual rates or provide at least three days of paid leave per year do not need to provide additional paid sick leave.
- An employer is not required to pay unused sick time to a terminated employee, but must reinstate their previously earned sick accrual if rehired within one year.
- The pay rate for used sick time is the same as an employee’s regular hourly rate. For commission or piece-rate employees, the rate is equal to their total average hourly compensation during the previous 90 days.
- Employers must display a poster in the workplace which explains the sick leave accrual requirements and also inform new employees of their rights, in writing.
- Employers must provide a written statement to each employee with their accrued sick time after each pay period and effective as of that same date. This can be listed on their pay stub or a separate document.
- Employers are required to keep records of hours worked and accrued sick time for three years. These records must be provided to the employee or Labor Commissioner if requested.
These final points are particularly notable—is your company able to provide regular updates to your employees and comply with the long-term record keeping? Businesses which fail to comply with these regulations, willfully or not, are subject to harsh penalties.
How Will this Affect Payroll and Record Keeping?
You can see how much additional record keeping will be required. It is important to keep sufficient documentation to ensure compliance should your company be audited or face a labor dispute. Record keeping for payroll has become so cumbersome that it’s virtually impossible to do manually. TimeClick® can automate your time tracking and payroll management, helping to maintain full records and compliance with current (and coming) legislation.
Enforcement and Penalties
Violations of workplace legislation can result in penalties from $1,100 to over $100,000. Though serious, they are avoidable with good payroll management software. An automated solution saves employers hours of tedious manual calculations and potentially expensive penalties. TimeClick® will track daily employee hours as they clock in and out, including lunch and breaks, and provide you with the reporting needed to correctly identify full-time employees. Avoid false claims or penalties for incorrect documentation or classification.
TimeClick® is Prepared for These New Laws and More
Whether it is the FLSA, Affordable Care Act, or Healthy Workplaces, Healthy Families Act, you need software to help you meet their standards. TimeClick® does this and so much more;
- Securely log personal employee information.
- Record workweek and pay period definitions.
- Access time worked for any employee, including both straight time and overtime, for any interval you choose.
- Calculate average hours worked over any interval, including by the week or month, to determine the full or part-time status and health care eligibility of all employees.
- Set sick time accrual parameters to meet the new standards.
- If granted permission, employees may view their own accrual banks at any time.
- Employee timesheets show accrued time for the pay period.
- Run reports which show accumulated sick time or other totals.
- Run reports which show an employee’s sick time usage for any chosen interval.
TimeClick® Administrators can print reports in seconds to comply with documentation requirements and access years of data with just a few mouse clicks, instead of sifting through file cabinets of records, hoping the right information is there. So get automated and compliant with the current, as well as coming, legislation.