Employing people comes with certain responsibilities. There are laws in place to protect workers and ensure that they are paid fairly and correctly. There are also laws that specify how much must be paid in taxes by employees and employers and what benefits must be extended to workers.
It’s important that employers understand the laws that pertain to their company and each location.
The federal minimum wage for the United States is currently $7.29 as established on July 24, 2009. Many states and even some localities specify higher minimum wages. When employers operate in a locality in which more than one jurisdiction specifies a minimum wage, they are required to provide the higher amount of the two.
Tipped employees may be paid less than minimum wage by employers, there is a separate minimum wage that governs tipped employee wages. However, employees must still make minimum wage when tips and wages are combined. If an employee is found to make under minimum wage for the hours worked after tips and wages are combined, the employer is responsible for paying the employee the difference.
Federal law requires employers to pay employees “promptly.” While this is rather vague, many states require employers to provide payment at specified intervals, such as at least twice per month. Employers that are unsure about requirements should do research to find out the required pay frequency so that laws aren’t inadvertently broken.
Tax Collection and Filing
Employers are generally responsible for collecting income taxes from employees each pay period and then submitting those taxes on a monthly or more frequent basis. Taxes must be submitted for Medicare, social security, and income tax as required and may need to be submitted to both state and federal branches. Forms may also need to be filed yearly.
Federal law requires most workers to be paid at one and a half times their regular rate of pay for any hours worked over 40. So if an employee’s normal hourly rate is $10 per hour and they work 41 hours, they would be paid $15 for that one hour over 40. The law automatically protects people earning less than $455 per week or $23,660 per year.
When employees make more than these protected brackets, the law still generally requires employers to pay overtime. However, there may be certain exemptions for salaried employees in administrative or executive roles. Certain states and localities may also have stricter laws in place requiring double time or requiring employees to compensate even administrative employees at the time and a half rate for hours worked in excess of 40.
If employees don’t fit the correct criteria, employers may be penalized and required to pay employees retroactively if overtime isn’t paid. It’s important for employers to keep track of hours worked and ensure that employees are paid according to all applicable overtime laws.
Keeping track of payroll laws and following them to the letter manually can be very taxing. Payroll software can help employers to stay knowledgeable of current laws and also take care of aspects of compliance like report filing, overtime calculation, and payroll processing. Some software will even assist with things like flagging minors in scheduling and alerting managers to potential overtime.
If you feel that payroll software could help your company better comply with payroll laws, we can help you select a solution. Visit our vendor match page to get started.
Authored by: Dave Rietsema