Managing Your Employees’ Hours And Wages
Paying wages and managing the hours your employees work can be two of the most complicated tasks in your small business. There are federal and state laws which cover almost every aspect of these issues. Sometimes federal and state guide lines conflict with one another. In those cases, the employer is required to combine the regulations in a way which most benefits the employee.
Since paying wages and managing employees’ hours is such a complex subject governed by countless legal requirements, it is easy for a small business owner to make mistakes if he/she does not have a huge HR department. It is well worth the effort to become familiar with the laws governing the most common areas of compensation for hours worked. If at all possible, a small business owner should retain the services of legal counsel when structuring hourly wages and hours on the work schedule.
There are far too many issues related to this subject to cover them in a single post. The New York Times ran a very helpful article on the subject of compensatory time which is one of the more common issues that arise in this area. Here is a portion of what it says–
“Compensatory Time Off (CTO) refers to employees being given time off in lieu of extra compensation or overtime pay. (CTO should be distinguished from makeup time, where employees are allowed to make up work time missed because of personal obligations.) With regard to exempt employees, CTO is not usually a big issue if the person is properly classified. That’s because the employee is exempt from overtime pay in the first place. But employers should be cautious about using CTO and other wage and hour measures in ways that treat the employee as nonexempt because you do not want to endanger exempt status.
With regard to nonexempt employees in the private sector, the federal Fair Labor Standards Act (FLSA) generally does not allow CTO. Under the FLSA, employees must be paid for all time worked and employers are not permitted to give time off in place of pay. Rather, the FLSA allows an employer to regulate compensation by permitting the employer to control the hours an employee works. For example, if an employee on a 40 hour per week schedule actually works 41 hours in one week, the employer normally has the option of changing the next week’s schedule to 38.5 hours in order to keep the employee’s pay at the usual level. The 38.5 hour week accounts for the prior week’s premium pay (1½ hours pay for one hour of overtime).
Used sparingly, compensatory time can be a good option for businesses which need occasional overtime hours from employees, but don’t have the money to pay overtime wages. It’s a Win-Win arrangement as long as limits are set and respected by both the employer and the employees.
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