This week happens to be National Payroll Week, so it’s a good time to sort through some of the misconceptions and lingering questions about payroll that accountants may be hearing from their business clients.
Chris Rush, division vice president of strategy for ADP Small Business Services, said ADP often fields a number of common questions about payroll from its customers. National Payroll Week, which started back in 1996, is a good time to address them.
“We find that pay requirements for small business owners are really complicated, and we get a lot of questions in our service centers on a daily basis about key misconceptions,” said Rush.
The Fair Labor Standards Act, or FLSA, governs what employers must pay non-exempt employees, he noted, and they must pay those employees for all the hours they work.
“A lot of what we see are issues related to what they need to pay non-exempt employees for,” said Rush. “One of the big misconceptions we see is that all managers are exempt. The reality is the job title doesn’t determine that. The FLSA is pretty clear that there are specific salary and duties tests that must be met in order for an employee to be considered exempt.”
Another misconception involves whether workers can waive their right to overtime pay. The answer is no. “Employees can’t waive their right to overtime pay, particularly non-exempt employees,” said Rush. “If an employee is not exempt, they must be paid overtime whenever they work more than 40 hours in a workweek.”
Still another misconception involves direct deposit. “There’s a misconception that everyone can be paid by direct deposit,” said Rush. “Employers can give employees the option to be paid by direct deposit, but there are states out there that prohibit employers from requiring their employees use direct deposit, so they leave it up to the employee to make the decision on whether they want to opt in for direct deposit or not.”
ADP also receives questions about the types of things for which they have to pay employees. “For example, do they have to pay non-exempt employees for time spent in training? Again, the answer is yes,” said Rush. “Under the FLSA, training that’s related to the employee’s job or that’s going to help the employee in their current job become more effective, they have to pay employees for that. There are exceptions to training where you can be unpaid, but they’re really stringent. You have to meet four kinds of criteria: attendance is outside of the employee’s regular working hours; the attendance is voluntary; the course, lectures or meetings are not directly related to their job; and they’re not actually doing work while attending the training. They have to meet those criteria; otherwise it’s considered paid training.”
Another misconception or question that ADP often hears involves injuries. “If an employee has to go to the hospital for treatment, do they have to be paid at the time they’re seeking treatment? Again the answer is yes,” said Rush. “Time spent waiting for and receiving treatment has to be paid for if it’s during normal working hours.”
Another question that often comes up is about office parties, such as the annual holiday party. “If the company is having a holiday party, do they have to pay their employees for the time spent at the party? Again the FLSA is pretty clear on these kinds of things,” said Rush. “If a party is required or it occurs during normal working hours, employees must generally be paid for time spent at the party.”
ADP runs a series of webinars to help businesses and their accountants deal with the various requirements. For more information, visit www.adp.com/accountant.