Payroll Mistake #3: Failing to Follow Labor Laws
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Payroll Mistake #3: Not Following Labor Laws

This is part 3 of a seven-part series for small business owners looking to avoid making payroll mistakes.

Avoid Payroll Mistakes Employers can unknowingly run afoul of the Fair Labor Standards Act (FLSA) and other laws.

Why is this important?

  • It’s easy for employees to file a free, confidential complaint with the U.S. Department of Labor.
  • You could be subject to fines, penalties, or legal challenges.

How to avoid this mistake:
Check your compliance in these areas:

Minimum Wage and Overtime Laws
You must pay employees whichever is higher: the federal or state minimum wage. And while most states require overtime pay of 1 ½ times the regular rate after 40 hours, a few states require it after only 8 or 12 hours in a workday. Make sure you’re in compliance with your state’s minimum wage and overtime laws.

Exempt vs. Nonexempt Employees
Employers generally do not pay overtime to exempt employees. However, the definition of exempt vs. nonexempt causes confusion, since an employee’s job title does not automatically determine their status. To be considered exempt, employees must meet FLSA tests of their specific duties and salary. Read the Department of Labor Fact Sheet for more information.

You must keep records for each nonexempt worker, including accurate employee information, hours worked, and wages earned. Learn more about recordkeeping requirements for your employees.

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