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April 30, 2012
Common Mistakes in Paying Employees

According to Texas Business Today, a quarterly publication of the Texas Workforce Commission, probably the best way to avoid most compliance problems unnecessary scrutiny from government agencies is to ensure that employees are paid properly and fairly. Employees who feel that they are being properly paid are much less likely to perceive grievances in other areas of employee relations as well. The main reason most people work is to get paid, so taking care of that will minimize the biggest source of hard feelings.

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Here are the major mistakes to avoid:

  • Not paying the agreed-upon wage: Always follow the wage agreement. Always. Never cut someone’s pay retroactively. Always give advance, preferably written, notice of changes in pay. Written notice is best because it can be the best evidence of what the wage agreement was.
  • Not putting wage agreements in writing: Unwritten wage agreements are subject to uncertainty and interpretation. Don’t let that happen; put wage agreements in writing and have them signed by the employee and a company representative, then follow them exactly.
  • Averaging hours worked over 2 or more workweeks: The Fair Labor Standards Act (FLSA) generally requires payment of overtime pay on a workweek-by-workweek basis. With only a few narrow exceptions, track and pay overtime pay for each 7-day workweek in which an employee works more than 40 hours.
  • Deducting money from pay without written authorization: Other than court-ordered garnishments and deductions that are either required or specifically authorized under laws or regulations, all wage deductions should be authorized by the employee
  • .
  • Loaning money, advancing wages, or paying wages without maintaining clear, written documentation of the transaction: Banks do not loan or advance money without a signed, written agreement for repayment—neither should an employer. If loans or wage advances are to be repaid via wage deductions, obtain written authorization for the deductions, specifying amounts and intervals, and do not forget to provide for deduction of any remaining balance at the time of a work separation. Never pay wages in cash without getting a signed, written receipt from the employee.
  • Allowing employees to work off the clock: The U.S. Department of Labor and the courts do not recognize the concept of voluntary overtime without proper overtime pay. Agreements by employees to give up their rights to minimum wage and overtime pay are void and unenforceable.
  • Thinking that paying an employee a salary is enough to avoid having to pay overtime: A salary alone does not make an employee exempt. An exempt-sounding title alone is not enough to make an employee exempt. [The executive, administrative, and professional overtime exemptions apply only to employees who are paid on a true salary basis and pass the duties tests for exemption.]

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