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Essential Recordkeeping for Nonexempt and Exempt Employees

 

The Fair Labor Standards Act (FLSA) regulates federal minimum wage, overtime, child labor, and recordkeeping, including payroll recordkeeping for nonexempt and exempt employees. Although the Act does not bound employers to any particular method of recordkeeping, it does require that employers keep accurate and complete records for nonexempt and exempt workers.

Criteria for Nonexempt Employees

For nonexempt employees, retain the following records for at least three years:

  • Full name, Social Security number, and address
  • Date of birth (if under 19 years of age), gender, and occupation
  • Time and day of the week that the workweek begins
  • Hours worked daily and weekly
  • Wage basis (such as hourly, flat amount per week, or piece rate basis)
  • Hourly pay rate
  • Daily or weekly straight-time earnings
  • Weekly overtime wages
  • Deductions from or additions to wages
  • Pay period wages
  • Payment dates and pay periods covered

If a nonexempt employee works a fixed schedule, such as 8 hours per day, 40 hours per week, you simply maintain records that show the set daily and weekly work hours and then note that the employee followed the schedule. If the employee deviates from the schedule, the records must show the exact hours worked during the exception period.

Criteria for Exempt Employees

Payroll records for exempt employees also should be retained for at least three years. Because exempt employees are not paid according to hours worked, it’s important that employers do not track work hours, as this could raise questions (by the Department of Labor) as to whether the employee is truly exempt. You can, however, track vacation, sick, and personal time. Although employers do not have to record hours worked and overtime information for exempt employees, the FLSA says to retain the following:

  • Full name, Social Security number, and address
  • Date of birth (if under 19 years of age), gender, and occupation
  • Time and day of the week that the workweek begins
  • Total earnings for the pay period
  • Payment dates and pay periods covered
  • Wage basis (e.g., $850 per week plus any fringe benefits)

These criteria are relevant to executive, administrative, professional, and outside sales employees who are exempt from the FLSA’s minimum wage and overtime pay requirements.

Certificates, Contracts, and Supplemental Records

Keep payroll certificates, collective bargaining agreements, and individual employment contracts for at least three years. Also, retain records used as the basis for determining work hours, such as time cards and work schedules, for a minimum of two years. Records must be kept at the worksite or a central recordkeeping office.

Depending on your business, other FLSA payroll recordkeeping laws may apply. For instance, the Act has special recordkeeping rules for tipped employees and workers who are paid at the subminimum wage rate. Plus, some states have their own payroll recordkeeping rules that require additional documentation for nonexempt employees or a longer retention period of certain payroll records.

Call us today if you want to learn more about the FLSA and to ensure correct application of the relevant state laws.

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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