Payroll Issues Part One

While you rely on a payroll provider like BCM Payroll Services (located in Chambersburg, PA, serving South Central PA, and Maryland from Hagerstown to Frederick), there are many complexities that you still need to be aware of.

Frequency and Timing of Payrolls

Payroll can be paid weekly, bi-weekly (every two weeks), semi-monthly, or monthly. Employees tend to prefer more frequent paychecks and employers tend to lean towards less frequent to control costs.

Keep in mind that some states do regulate the time periods in which an employee must be paid. As always you must be aware of your state and local requirements.

Direct Deposits

Today most employees are paid through direct deposit. Several states prohibit employers from requiring direct deposit of employee paychecks. If your business is located in a state that doesn’t regulate direct deposit than you can require that of your employees, as long as they can deposit their paychecks in the institution of their choice.

It is best practice to obtain and retain written authorization of the employees direct deposit that includes the employee’s financial institution of choice.

Deductions

The circumstances under which employees are permitted to make pay deductions is governed by the Fair Labor Standards Act (FLSA) and related state laws.

The restrictions vary depending on whether the employee is classified as exempt or non-exempt.

For non-exempt employees, generally if the deduction is for the primary benefit or convenience of the employer the deduction must not reduce the employee’s pay below the minimum wage or impact their overtime wages. Deductions that can’t reduce a non-exempt employee’s pay below the minimum wage (either federal, state or local) includes the following:

• Cash shortages
• Tools used in the employee’s work
• Employer-required uniforms
• Damages to company property by the employee or any other individual
• Financial losses due to clients/customers not paying bills
• Theft of company property by employees or any other individual

Exempt Employees

These are employees that receive a set salary each week in which they perform work. Deductions from an exempt employees pay are permitted when:

• When an employee is absent for one or more full days for personal reasons other than sickness or disability
• For one or more full day absence due to sickness or disability if the deduction is made according to a bona fide plan, policy or practice of providing compensation for salary lost due to illness
• To offset jury or witness fees, or for temporary military duty pay
• For penalties imposed in good faith for infractions of safety rules of major significance
• For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct infractions
• In the employee’s first or last week of employment if the employee does not work the full week
• For unpaid leave taken by the employee under the Family and Medical Leave Act