Payroll never seem to get any easier, does it? With every new calendar year come changes in labor laws, taxes, and just about everything else that affects payroll processing. That is why it’s so important to have competent people working on your payroll. Even better is a third-party payroll provider with the expertise and knowledge to do things efficiently, correctly, and in full compliance.
As a business owner or senior manager, how does your company handle payroll? Companies still handling everything in-house are now in the minority. Perhaps that’s because it’s just getting too difficult to handle payroll if you’re not a trained professional. Be that as it may, there are employers who will continue to go it alone. If you are one of them, here are five payroll traps you should strive to avoid in 2018:
1. Undocumented Break Time
Most employers give their workers a half-hour for lunch and 10-minute breaks in the morning and afternoon. What you may not know is that these breaks are not mandatory under the FLSA. In fact, the U.S. Department of Labor website explains that short breaks lasting between 5 and 20 minutes are compensable and should be considered as regular time worked when figuring overtime pay. Half-hour lunch breaks are not compensable.
To avoid problems in this area, avoid the trap of undocumented break time. In other words, require your employees to clock out for lunch and then back in when they return. This is the only way you can prove they actually took a lunch for which they will not be compensated and that will not be counted toward regular hours worked.
2. Extra Pay Applied Overtime
Overtime pay for hours worked in excess of 40 are based on an employee’s regular pay rate. That means certain kinds of extra pay are not used in an overtime calculation. One example is bonus pay. The trap here is not using shift differential to work out overtime pay. For some employees who regularly receive shift differential for working unpopular shifts, like healthcare workers for example, the shift differential is considered regular pay and must be included in overtime calculations.
3. Pay for Non-Work Tasks
All tasks performed while on duty are considered compensable tasks by the IRS. Those performed while not on duty are not. Avoid the trap of confusing the two. Non-compensable tasks include things like commuting and walking from the parking lot into the building.
4. Pay for Training and Meetings
Another common trap is not properly accounting for training and time spent in meetings. Both training and meeting time is compensable unless all four of the following conditions apply:
- Attendance is voluntary;
- Training and meetings are held outside of regular working hours;
- Training and meetings are not directly job-related; and
- No actual work is conducted during training or meeting time.
5. Paying Based on Shifts
Some employers pay their workers based on their scheduled shifts, thereby making it less important to detail actual hours worked. This is bad practice. Avoid it. Why? Because even if you elect to pay your employees based on their scheduled shifts, you are not exempt from keeping accurate records of hours worked. Furthermore, paying based on scheduled shifts could cost you more or, worse yet, end up shortchanging your employees.
Dallas-based BenefitMall encourages employers to make sure their payroll systems are in compliance for 2018. If any assistance is required, they are more than happy to design an online payroll solution. BenefitMall offers specialized solutions for the construction and restaurant industries as well.