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  • determine workweek and employee pay

    How to Determine a Workweek and Employee Pay

    posted by Kaylee Riley
    Newest Article
  • The pros and cons to pay cards

    What Is a Pay Card?

    posted by Kaylee Riley
    Recent Article
  • How to Determine a Workweek and Employee Pay

    According to the U.S. Department of Labor, a workweek is a regularly recurring period of 168 hours (seven consecutive 24-hour periods). A workweek does not have to follow a standard calendar week. It can start on any day of the week and at any time, giving you flexibility to create a workweek that meets your business’s needs. For example, a workweek could start on Tuesday at 12 a.m. and end on Monday at 11:59 p.m.

    A workweek is a fixed period of time. It cannot be moved to avoid paying overtime, to accommodate large events, or for any other reason. However, you can change a workweek if it is intended to be permanent. You cannot frequently change the start of the workweek.

    You can create different workweeks for different employees, groups of employees, and business locations. This can be beneficial if their regular weekly tasks have different timelines. However, creating different workweeks could make your payroll more complicated.

    Workweek overtime rules

    The main purpose of a workweek is to determine overtime under the Fair Labor Standards Act (FLSA). Under the FLSA, you must pay employees overtime pay (time and one-half of their regular pay) for any time they work over 40 hours in a workweek. Any overtime pay earned during a workweek must be paid on the normal pay day for that pay period.

    When calculating overtime pay, workweeks stand alone. For example, an employee works 35 hours one week and 45 hours the next week for a total of 80 hours. Even though the total hours averages to 40 hours worked each week, the employee must still be paid for the five overtime hours worked during the second week.

    You should also let your employees know when the workweek begins and ends so they are aware of when they start working overtime hours.

    Some states have their own overtime laws. If you are in a state that has overtime laws, the higher rate of overtime pay will apply.

    Changing a workweek

    You cannot change a workweek to avoid paying overtime hours. Changing a workweek is acceptable if you intend the change to be permanent.

    If you do change your workweek, there will be some overlap between the old workweek and the new workweek. If your old workweek started on Sunday at 5 a.m. and your new workweek starts on Saturday at 5 a.m., the hours between 5 a.m. Saturday and 5 a.m. Sunday are part of both the old and new workweeks.

    If your employees do not work any hours during the overlap, you determine their pay the same way as you normally would. If your employees do work during the overlap, calculating their pay can be tricky. There are a few steps to follow:

    1. Calculate the pay for the old workweek, including the overlapping hours. If the employee worked 45 hours plus 5 hours during the overlap, they worked 50 hours during the old workweek. If they are paid $10 and hour, they would be owed $550 (40x$10+10x$15).
    2. Next, calculate the overlapping hours as part of the new workweek. If the employee worked 30 hours plus the 5 hours during the overlap, they worked 35 hours during the new workweek. They would be owed $350 (35x$10).
    3. Finally, determine which week will result in the greatest compensation. The overlapping hours should be included in that week. The employee would then be paid for 50 hours for the old work week ($550) and for 30 hours for the new workweek ($300).

    Fluctuating workweek

    A fluctuating workweek does not mean the start of the workweek regularly changes. Instead, it is a method for paying salaried, nonexempt employees that work a fluctuating number of hours each workweek.

    Employers have two options to pay their salaried, nonexempt employees for overtime: either pay the regular salary plus time and one-half, or use the fluctuating workweek method. The fluctuating workweek method for determining employee pay works if five requirements are met:

    • The employee must work fluctuating hours from week to week.
    • The employee must be paid a fixed salary.
    • The salary must be large enough to compensate the employee with at least minimum wage for all of the hours worked.
    • The employee must earn one-half their regular rate for all overtime hours.
    • There must be a clear understanding between the employer and employee.

    For example, an employee has a salary of $700 a week. She works 40 hours one week and 50 the next. For the first week, she receives exactly $700 since there are no overtime hours. To determine her pay for the second week, her hourly rate needs to be calculated. Since the salary already covers all hours worked in the week, her salary is divided by the total hours worked. Her hourly rate would be $14 ($700/50). The employee is then due $770 ($700+10x$7) for the second week.

    A workweek cannot be changed to accommodate a fluctuating workweek unless it is a permanent change.

    Determining a workweek does not have to be difficult, but it is important to do choose it wisely since changing it could cause a payroll hastle.

    Our easy to use payroll software can help you run your payroll and calculate overtime for your employees. Try it for free!

    What Is a Pay Card?

    A pay card (or payroll card) is a prepaid card that an employer can use to pay their employees. Each payday, the card is loaded with the employee’s wages for that pay period. Employees can then use the pay card like a debit card, or they can withdraw their wages through an ATM, bank cashier, or a purchase where they receive cash back.

    Pay cards are often used as an alternative to paper checks or direct deposit.

    A 2012 study found that $34 billion was loaded on 4.6 million active pay cards, which is expected to grow to $68.9 billion loaded on 10.8 million cards by 2017.

    What are the pros to pay cards?

    Pay cards are beneficial to employees that are unbanked, meaning they do not have any bank accounts. In 2013, 7.7 percent of households were unbanked (about 9.6 million households), according to a 2013 Federal Deposit Insurance Corporation (FDIC) national survey of unbanked and underbanked households. Unbanked employees are unable to use direct deposit and they may incur large check-cashing fees for paper checks. Pay cards let unbanked employees receive their pay and immediately use it.

    Employers can save money by using pay cards. Paycards are reloadable, so employers do not need to purchase new cards for every pay period, like they would have to do with paper check stock.

    Pay cards can also be used like debit cards at most businesses since they are often distributed by common card companies, e.g., Visa, MasterCard.

    What are the cons to pay cards?

    Employees can be hit with many different fees from pay cards. These could include ATM fees, replacement fees, inactivity fees, and balance inquiry fees. With so many fees, employees could lose significant portions of their wages.

    Also, ATMs do not disburse money to exact dollar and cent amounts, meaning workers may not be able to withdraw their whole pay.

    More information about pay cards

    There have been cases where employers required employees to receive their wages using pay cards, subjecting them to related fees. According to the Fair Labor Standards Act (FLSA), employees should have an option as to how they receive their pay. Employers cannot require employees to use pay cards. They must offer wages in a form of cash or in a way that can be easily converted into cash.

    According to a Consumer Finance Protection Bureau bulletin, pay cards must meet the requirements laid out in Federal Reserve Regulation E, which implements the Electronic Fund Transfer Act (EFTA) of 1978. These requirements include:

    • Employees must know of any fees they could have from using a pay card.
    • The card issuer must make the card’s transaction history available for review by the employee.
    • The employee’s liability for unauthorized card use is limited.
    • Financial institutions must respond to a consumer’s report of errors as long as it is within a certain amount of time.

    Many states also have laws that say workers should receive their pay in full and without reductions. This has made pay cards controversial since employees cannot always receive their full pay from ATMs and because portions of their pay may be taken away in fees. Check with your state authorities to find out if you need to follow any state-specific pay card rules.

    One famous case against pay cards took place in Pennsylvania. In 2013, an employee sued the owner of several McDonald’s restaurants. The employees were required to use pay cards, which subjected them to many fees. In June 2015, a judge ruled that paying employees with pay cards that incur fees when trying to withdraw cash is illegal in Pennsylvania.

    When deciding if pay cards are right for your employees, remember to consider your state laws in addition to the pros and cons.

    Do you need help running payroll for your business? Our payroll software makes it simple. We even provide free direct deposit and an option to print checks so you can offer multiple pay options to your employees.

    Pay Stub: What to Include and What to Understand

    It’s important to know how to read a pay stub. Understanding what items to include on a pay stub, and the meanings behind them, will help you to catch payroll errors and may prevent you from potentially costly mistakes. Or you may need to answer an employee’s questions about how they are paid.

    In addition to your employees’ basic information, a pay stub will have an itemized account of their salary or wages as well as any other additions to their pay. It will also list any taxes or deductions from their pay.

    What Is the New DOL Test to Identify Independent Contractors?

    The Wage and Hour Division of the U.S. Department of Labor (DOL) released an administrator’s interpretation on July 15, 2015, containing their new guidance on how to identify someone as an independent contractor.

    The DOL’s new guidelines to determine a worker’s status could mean big changes for some businesses. Workers that are classified as independent contractors are filed with Form 1099 and do not receive overtime pay or benefits. Also, the employer does not withhold any taxes from the worker’s pay. Workers that are classified as employees are filed with Form W-2, can receive benefits and overtime pay, and have taxes withheld from their pay.

    How to Pay Nonprofit Employees

    People often think that nonprofit organizations run off of volunteers, or if they do have employees, they are poorly paid. This is not always true.

    Many nonprofit organizations have employees and they are well compensated for their work. Nonprofits tend to attract and retain  top talent by giving their employees compensation that is similar or equal to for-profit organizations.

    The Basics of Payroll Tax Withholding

    Payroll tax withholding refers to an employer retaining part of an employee’s salary. The withheld amount is paid as tax directly to the IRS or other appropriate organization, like the Social Security Administration. Withholding lets the employee to pay taxes every month from each paycheck. Doing this reduces how much the employee might have to pay when they file their annual tax returns.

    The amount withheld is based on the employee’s income and other details, like exemptions, marital status and dependents. If the total amount withheld for the year is more than what the employee would have had to pay on their annual tax returns, the employee will get a tax refund.

    What Is California’s Sick Leave Law?

    The Healthy Workplace Healthy Family Act of 2014 (AB 1522), along with its amendments (AB 304), changed how employee sick leave works. Effective July 1, 2015, the law affects current employers and employees in regard to earned paid sick leave. There are a few exceptions to the law, but the majority of all employers in California will now need to give their employees mandatory paid sick leave.

    Do I Have to Pay Self-Employment Tax?

    Self-employment is part of the American dream for many. To do what you love and get paid for it can be incredibly rewarding if handled properly. However, one of the factors that needs to be considered is self-employment tax — which is a necessary evil when you are doing what you love!

    Benjamin Franklin, whose face graces the U.S. hundred-dollar bill, once said, “In this world nothing can be said to be certain, except death and taxes.” While taxes may be a certain part of doing business and working, you may not be so certain about how to properly account for those taxes if you are self-employed…

    What is Social Security Tax?

    Social security, officially called the Old-Age, Survivors, and Disability Insurance (OASDI), is a system designed to help support those who are no longer able to work due to old age. It also supports widows/widowers and those who are disabled. To fund social security payments, every employee, employer, and self-employed person in the U.S. is required to pay social security tax. This tax is automatically withheld from every paycheck issued by an employer. It’s the employer’s job to make certain that the tax is remitted to the appropriate agency at the correct time.

    Understanding Exempt vs Nonexempt Employees

    As an employer, you will need to know the difference between exempt vs nonexempt employees. Employers need to categorize employees into appropriate groups based on their job duties and responsibilities. This will mainly affect payroll processing, as designating workers into these groups will have an impact on how you pay them and track the hours they work.

    How to Determine a Workweek and Employee Pay

    According to the U.S. Department of Labor, a workweek is a regularly recurring period of 168 hours (seven consecutive 24-hour periods). A workweek does not have to follow a standard calendar week. It can start on any day of the week and at any time, giving you flexibility to create a workweek that meets your business’s needs. For example, a workweek could start on Tuesday at 12 a.m. and end on Monday at 11:59 p.m.

    A workweek is a fixed period of time. It cannot be moved to avoid paying overtime, to accommodate large events, or for any other reason. However, you can change a workweek if it is intended to be permanent. You cannot frequently change the start of the workweek.

    You can create different workweeks for different employees, groups of employees, and business locations. This can be beneficial if their regular weekly tasks have different timelines. However, creating different workweeks could make your payroll more complicated.

    Workweek overtime rules

    The main purpose of a workweek is to determine overtime under the Fair Labor Standards Act (FLSA). Under the FLSA, you must pay employees overtime pay (time and one-half of their regular pay) for any time they work over 40 hours in a workweek. Any overtime pay earned during a workweek must be paid on the normal pay day for that pay period.

    When calculating overtime pay, workweeks stand alone. For example, an employee works 35 hours one week and 45 hours the next week for a total of 80 hours. Even though the total hours averages to 40 hours worked each week, the employee must still be paid for the five overtime hours worked during the second week.

    You should also let your employees know when the workweek begins and ends so they are aware of when they start working overtime hours.

    Some states have their own overtime laws. If you are in a state that has overtime laws, the higher rate of overtime pay will apply.

    Changing a workweek

    You cannot change a workweek to avoid paying overtime hours. Changing a workweek is acceptable if you intend the change to be permanent.

    If you do change your workweek, there will be some overlap between the old workweek and the new workweek. If your old workweek started on Sunday at 5 a.m. and your new workweek starts on Saturday at 5 a.m., the hours between 5 a.m. Saturday and 5 a.m. Sunday are part of both the old and new workweeks.

    If your employees do not work any hours during the overlap, you determine their pay the same way as you normally would. If your employees do work during the overlap, calculating their pay can be tricky. There are a few steps to follow:

    1. Calculate the pay for the old workweek, including the overlapping hours. If the employee worked 45 hours plus 5 hours during the overlap, they worked 50 hours during the old workweek. If they are paid $10 and hour, they would be owed $550 (40x$10+10x$15).
    2. Next, calculate the overlapping hours as part of the new workweek. If the employee worked 30 hours plus the 5 hours during the overlap, they worked 35 hours during the new workweek. They would be owed $350 (35x$10).
    3. Finally, determine which week will result in the greatest compensation. The overlapping hours should be included in that week. The employee would then be paid for 50 hours for the old work week ($550) and for 30 hours for the new workweek ($300).

    Fluctuating workweek

    A fluctuating workweek does not mean the start of the workweek regularly changes. Instead, it is a method for paying salaried, nonexempt employees that work a fluctuating number of hours each workweek.

    Employers have two options to pay their salaried, nonexempt employees for overtime: either pay the regular salary plus time and one-half, or use the fluctuating workweek method. The fluctuating workweek method for determining employee pay works if five requirements are met:

    • The employee must work fluctuating hours from week to week.
    • The employee must be paid a fixed salary.
    • The salary must be large enough to compensate the employee with at least minimum wage for all of the hours worked.
    • The employee must earn one-half their regular rate for all overtime hours.
    • There must be a clear understanding between the employer and employee.

    For example, an employee has a salary of $700 a week. She works 40 hours one week and 50 the next. For the first week, she receives exactly $700 since there are no overtime hours. To determine her pay for the second week, her hourly rate needs to be calculated. Since the salary already covers all hours worked in the week, her salary is divided by the total hours worked. Her hourly rate would be $14 ($700/50). The employee is then due $770 ($700+10x$7) for the second week.

    A workweek cannot be changed to accommodate a fluctuating workweek unless it is a permanent change.

    Determining a workweek does not have to be difficult, but it is important to do choose it wisely since changing it could cause a payroll hastle.

    Our easy to use payroll software can help you run your payroll and calculate overtime for your employees. Try it for free!

    What Is a Pay Card?

    A pay card (or payroll card) is a prepaid card that an employer can use to pay their employees. Each payday, the card is loaded with the employee’s wages for that pay period. Employees can then use the pay card like a debit card, or they can withdraw their wages through an ATM, bank cashier, or a purchase where they receive cash back.

    Pay cards are often used as an alternative to paper checks or direct deposit.

    A 2012 study found that $34 billion was loaded on 4.6 million active pay cards, which is expected to grow to $68.9 billion loaded on 10.8 million cards by 2017.

    What are the pros to pay cards?

    Pay cards are beneficial to employees that are unbanked, meaning they do not have any bank accounts. In 2013, 7.7 percent of households were unbanked (about 9.6 million households), according to a 2013 Federal Deposit Insurance Corporation (FDIC) national survey of unbanked and underbanked households. Unbanked employees are unable to use direct deposit and they may incur large check-cashing fees for paper checks. Pay cards let unbanked employees receive their pay and immediately use it.

    Employers can save money by using pay cards. Paycards are reloadable, so employers do not need to purchase new cards for every pay period, like they would have to do with paper check stock.

    Pay cards can also be used like debit cards at most businesses since they are often distributed by common card companies, e.g., Visa, MasterCard.

    What are the cons to pay cards?

    Employees can be hit with many different fees from pay cards. These could include ATM fees, replacement fees, inactivity fees, and balance inquiry fees. With so many fees, employees could lose significant portions of their wages.

    Also, ATMs do not disburse money to exact dollar and cent amounts, meaning workers may not be able to withdraw their whole pay.

    More information about pay cards

    There have been cases where employers required employees to receive their wages using pay cards, subjecting them to related fees. According to the Fair Labor Standards Act (FLSA), employees should have an option as to how they receive their pay. Employers cannot require employees to use pay cards. They must offer wages in a form of cash or in a way that can be easily converted into cash.

    According to a Consumer Finance Protection Bureau bulletin, pay cards must meet the requirements laid out in Federal Reserve Regulation E, which implements the Electronic Fund Transfer Act (EFTA) of 1978. These requirements include:

    • Employees must know of any fees they could have from using a pay card.
    • The card issuer must make the card’s transaction history available for review by the employee.
    • The employee’s liability for unauthorized card use is limited.
    • Financial institutions must respond to a consumer’s report of errors as long as it is within a certain amount of time.

    Many states also have laws that say workers should receive their pay in full and without reductions. This has made pay cards controversial since employees cannot always receive their full pay from ATMs and because portions of their pay may be taken away in fees. Check with your state authorities to find out if you need to follow any state-specific pay card rules.

    One famous case against pay cards took place in Pennsylvania. In 2013, an employee sued the owner of several McDonald’s restaurants. The employees were required to use pay cards, which subjected them to many fees. In June 2015, a judge ruled that paying employees with pay cards that incur fees when trying to withdraw cash is illegal in Pennsylvania.

    When deciding if pay cards are right for your employees, remember to consider your state laws in addition to the pros and cons.

    Do you need help running payroll for your business? Our payroll software makes it simple. We even provide free direct deposit and an option to print checks so you can offer multiple pay options to your employees.

    Pay Stub: What to Include and What to Understand

    It’s important to know how to read a pay stub. Understanding what items to include on a pay stub, and the meanings behind them, will help you to catch payroll errors and may prevent you from potentially costly mistakes. Or you may need to answer an employee’s questions about how they are paid.

    In addition to your employees’ basic information, a pay stub will have an itemized account of their salary or wages as well as any other additions to their pay. It will also list any taxes or deductions from their pay.

    What Is the New DOL Test to Identify Independent Contractors?

    The Wage and Hour Division of the U.S. Department of Labor (DOL) released an administrator’s interpretation on July 15, 2015, containing their new guidance on how to identify someone as an independent contractor.

    The DOL’s new guidelines to determine a worker’s status could mean big changes for some businesses. Workers that are classified as independent contractors are filed with Form 1099 and do not receive overtime pay or benefits. Also, the employer does not withhold any taxes from the worker’s pay. Workers that are classified as employees are filed with Form W-2, can receive benefits and overtime pay, and have taxes withheld from their pay.

    How to Pay Nonprofit Employees

    People often think that nonprofit organizations run off of volunteers, or if they do have employees, they are poorly paid. This is not always true.

    Many nonprofit organizations have employees and they are well compensated for their work. Nonprofits tend to attract and retain  top talent by giving their employees compensation that is similar or equal to for-profit organizations.

    The Basics of Payroll Tax Withholding

    Payroll tax withholding refers to an employer retaining part of an employee’s salary. The withheld amount is paid as tax directly to the IRS or other appropriate organization, like the Social Security Administration. Withholding lets the employee to pay taxes every month from each paycheck. Doing this reduces how much the employee might have to pay when they file their annual tax returns.

    The amount withheld is based on the employee’s income and other details, like exemptions, marital status and dependents. If the total amount withheld for the year is more than what the employee would have had to pay on their annual tax returns, the employee will get a tax refund.

    What Is California’s Sick Leave Law?

    The Healthy Workplace Healthy Family Act of 2014 (AB 1522), along with its amendments (AB 304), changed how employee sick leave works. Effective July 1, 2015, the law affects current employers and employees in regard to earned paid sick leave. There are a few exceptions to the law, but the majority of all employers in California will now need to give their employees mandatory paid sick leave.

    Do I Have to Pay Self-Employment Tax?

    Self-employment is part of the American dream for many. To do what you love and get paid for it can be incredibly rewarding if handled properly. However, one of the factors that needs to be considered is self-employment tax — which is a necessary evil when you are doing what you love!

    Benjamin Franklin, whose face graces the U.S. hundred-dollar bill, once said, “In this world nothing can be said to be certain, except death and taxes.” While taxes may be a certain part of doing business and working, you may not be so certain about how to properly account for those taxes if you are self-employed…

    What is Social Security Tax?

    Social security, officially called the Old-Age, Survivors, and Disability Insurance (OASDI), is a system designed to help support those who are no longer able to work due to old age. It also supports widows/widowers and those who are disabled. To fund social security payments, every employee, employer, and self-employed person in the U.S. is required to pay social security tax. This tax is automatically withheld from every paycheck issued by an employer. It’s the employer’s job to make certain that the tax is remitted to the appropriate agency at the correct time.

    Understanding Exempt vs Nonexempt Employees

    As an employer, you will need to know the difference between exempt vs nonexempt employees. Employers need to categorize employees into appropriate groups based on their job duties and responsibilities. This will mainly affect payroll processing, as designating workers into these groups will have an impact on how you pay them and track the hours they work.