“Situational awareness” is a term used in the military and elsewhere to describe an individual’s ability to stay fully alert of all potential threats and resources in his or her surroundings, and it’s a good skill for employers to hone in regard to determining and tracking employee wage rates. After all, the term “wages” includes more than just an employee’s allotted cash pay for work. How do tips and bonuses factor into determining an employee’s “wages”? Are you meeting the statutory minimum wage rate? And how do you correctly calculate overtime if you’re not factoring in all of the variables that determine an employee’s regular rate of pay? Do you even know what all of the variables are? To avoid the potential minefield of mistakes scattered among these details, you have to pay attention to everything that’s happening around you (and your employees). Luckily, Fiducial can help.
Minimum wage purposes
There are two important reasons for determining exactly what employees’ hourly wage rates are on a regular basis. First, the exact wage rate, not the employee’s “book” wage rate, determines whether you’re meeting the statutory minimum wage.
For example, let’s say an organization sets employees’ hourly rates at levels at or above the statutory minimum. But then it requires employees to live in employer-provided housing and deducts from their pay excessive rental charges. The organization may find it has unlawfully reduced the employees’ wages to levels below the minimum wage in violation of the Fair Labor Standards Act, and that’s a problem.
On the other hand, an employer may set employees’ wage rates at below the statutory minimum wage rates but, because the employees make substantial amounts in tips, the employer may still comply with the minimum wage guarantee.
Take stock of each employee’s specific situation to make sure you’re meeting minimum wage rates, and to determine each worker’s exact wage rate, which will come in handy if your employees need to work overtime.
The second major reason for determining each employee’s exact wage rate is to determine the employee’s “regular rate of pay” so you know what overtime premium must be paid. For instance, an employer may pay employees a set wage rate of $8 an hour, but this doesn’t necessarily mean that the employee’s “time-and-a-half” overtime premium is $12 an hour. An employer may regularly pay large bonuses, and these bonuses may have to be averaged with the employee’s regular hourly wage to determine the “regular rate of pay’’ for overtime purposes.
In other cases, an employer maintains an employee “thrift” plan through which it matches employee contributions to a savings plan. If properly structured, the employer’s extra contributions to the employee’s thrift plan won’t have to be included in the employee’s “regular rate of pay” for overtime purposes. The employer, however, cannot claim these excess payments as a credit toward what it owes the employee for working overtime. Fiducial can help you wend your way through the details and what-ifs of your specific situation, so both employer and employees are clear about wage rates and how they are calculated.
Certain exclusions apply
Specifically excluded from wages are payments such as gifts, paid leave, reimbursed expenses, discretionary bonuses, talent fees, contributions to employee pension and health plans, and certain premium payments. These amounts can complicate the ongoing determination of wages further, but don’t panic! Fiducial has your back; we can work through this with you. Contact us at 1-866-FIDUCIAL or make an appointment at one of our office locations for further assistance in maintaining your organization’s situational awareness of wages and other payroll matters, including the tax impact.