Handling Hourly Wages, Salary and Overtime Rates (Part I)

          

Wages, salary, and overtime rates are all expenses that we have to keep an eye on. Not only is it probably one of our highest expenses, but it also has legal implications attached to it. If not handled properly, you, as the business owner, can be personally liable for it (regardless of how your company is set up). In other words, even if you dissolve your corporation, your obligation to pay your employees will not be discharged due to the dissolution of your business. You will be personally liable for it. Furthermore, not only will you be obligated to pay your employees, the IRS will start an investigation to see if you owe any unpaid taxes.

Here is a nightmare experience I’ll share with you that happened to my father’s business while I was in law school, and before I was involved. My father recorded employees’ hours with a primitive paper-card-punch system. Anyone and everyone had access to the punch cards. At the end of each week my father would spend hours tallying up everyone’s hours. On payday he would issue everyone’s pay, half in the form of a check and the other half in cash, the way the employees requested it. This was a can of worms that was about to burst wide open, and it did.

A disgruntled employee went to the Department of Labor (“DOL”) and claimed that he had never received the cash portion of his pay. Other employees then knew that DOL had begun investigating the business and decided to be destructive. They started to break things in the business and purposely wreck some of the company’s assets, such as our cargo vans. All the while, my father’s hands were tied. He needed to contain the situation. And containing the situation meant he couldn’t fire anyone.

All of this could have been prevented if proper procedure had been followed. Want to find out what the proper procedures are and avoid creating a similar nightmare?  Tune in next week when I cover best practices in managing hourly wages, salary, and overtime rates.