HR and Payroll Law: When All Is Not as It Seems

Anyone who has even the minimum amount of experience dealing with payroll knows that a confusing maze of federal and state laws makes it tough to maintain compliance. Perhaps that is why so many companies are turning to third-party payroll providers like BenefitMall. Turning payroll over to a specialist alleviates companies from the burden and hassle that is payroll processing.

Just to illustrate how challenging legal compliance is, it might be helpful to look at some of the more confusing HR and payroll laws on the books. Thanks to the help of Entrepreneur guest contributor Matt Straz, there is no shortage of examples to look at.

Overtime Pay

Most states follow federal regulations for overtime pay as codified by the Fair Labor Standards Act (FLSA). Those regulations stipulate that workers must be paid 1.5 times their normal hourly rate for all hours in excess of 40 worked during a single work week. Simple enough, right? It is, unless your business is located in California.

Golden State employers must pay time-and-a-half rates based on both an 8-hour work day and a 40-hour work week. That means an employee working nine hours on a given day must earn extra pay for that extra hour. But that’s not all. They must receive extra pay for the first eight hours of a seventh consecutive day of work. They earn two times their base rate if they work in excess of 12 hours on a given day or past the 8-hour threshold on the seventh consecutive day of work.

Wage Reductions

You would think that companies should have the right to reduce wages if employees are not performing up to standard. Employers in Indiana do not have it so easy. Indiana law requires employers to gain written consent from an employee before wages can be reduced. Even if the employee does consent, he or she can terminate that consent at any time. Moreover, employers can only reduce wages for certain reasons as outlined under the law. If wages are reduced for any other reason, employers could be liable for triple damages.

Employ Payroll Information

In New Hampshire, bringing on a new employee requires going to great lengths to make sure that employee is fully informed. Employers must notify new hires in writing in regard to payroll scheduling, commission-based pay, the method by which employees are paid, and the date and place of payment for each cycle. If the employer chooses to make changes to their payroll system at any point, all employees must be notified in writing of those changes.

Direct Deposit Plans

Most of the states mandate that employers offer payment options other than direct deposit. Not so in Utah. Employers can establish direct deposit as their only means of paying employees as long as two conditions are met: at least two-thirds of current employees must already be using direct deposit and the company’s total federal employment taxes from the previous year must have been at least $250,000.

Performance Evaluations

HR departments have to be very careful about performance evaluations in Virginia. Anything and everything written down by a supervisor during an evaluation must be true and accurate. An employer could be found guilty of defamation for any information proved to be untrue.

This article has barely scratched the surface of some of the odd payroll and HR laws on the books. If your company finds payroll too difficult to keep in-house, know that you are not alone. Our complex legal environment is one of the reasons the payroll industry is thriving right now.