If you have employees, you know that you need to make sure that they are working the required hours and doing a good job. There can be many hurdles in the workplace to make sure that you have the right employees and that their performance is good. But there are other things an employer needs to worry about, and today we are talking about mistakes that happen regarding hours worked and worker’s pay. There are many rules and regulations that govern how to pay employees, and there can be big consequences if you make mistakes regarding payroll. When you are running a small business, you have many things to worry about on a day to day basis, and payroll is just one of them. Read on for some of the common time-keeping mistakes, and how you can avoid them and make running your business a little easier.
A surprisingly common practice for some business owners is to track employee’s time for most of the month, and then estimate the hours worked for the last few days. Perhaps you think you will make your employees happy by having those hours on their paychecks, or you don’t really understand how your payroll works. Estimating hours is a really bad business practice that you should remedy immediately. Consider all of these negative implications:
- Paying employees in advance of them working could result in overpaying them and cost your business financially.
- It could also result in underpaying your employees, if they work outside of their normal hours those last few days.
- Employees could quit and take advantage of those unworked days, or leave early on the last days of the month knowing that they usually are paid in advance and not double-checked.
- Manually adding time to an employee’s sheet could result in disputed hours by the employee.
- Creates an environment that can seem unprofessional.
- It could take up extra time to manually add in projected hours—time that could be better spent growing your business!
- There is so much room for error when you are estimating hours!
So don’t estimate your employee’s hours! If you have been doing this to avoid switching payroll dates, or because you don’t want to offend your employees with a change, you need to know that, as the boss, you have the final say. You need to put into practice what is best for your business, and estimating hours can not only hurt your profits, it can be bad for your employees.
Allowing Work Off-The-Clock
Non-exempt employees are required to track their hours, even if they have the same schedule every day they work. But sometimes employees can be motivated to work more than their schedules allow for, or can want to come in early to get started. Or maybe you have an employee that stays late every day, without tracking their hours, thinking they are going above and beyond. It could be tempting as an employer to let these employees work unpaid hours if they want to, but you are required to track all of your employee’s hours and pay them accordingly. Even if it is not approved, you are technically supposed to pay your employees whenever they are actively working. As the employer, you need to have clear guidelines as to when your employees can work, how many hours a week they can work, and whether or not overtime is allowed. If you establish early that all hours worked will be paid, and that you don’t tolerate working outside of set schedules, you won’t have as many problems with employees working off the clock.
Incorrect Classification of Employees
There are two ways to classify employees. They are either non-exempt, and paid hourly, or they are exempt and they are salaried. Salaried employees don’t need to track their hours, and non-exempt employees do. Exempt employees don’t get paid breaks, and do not get overtime pay (which is time and a half) when they work more than 40 hours a week. Sometimes employers can mistakenly classify their employees with the wrong designation, but other times they can do it deliberately. They might think they can save money and eliminate the hassle of tracking hours by having their workers classified as exempt. The Fair Labor Standards Act (FLSA) states that most employees need to be paid the federal minimum wage and overtime pay unless they are a bona fide executive, administrative, professional or outside sales employee. The job duties and salary of the employee must meet all of the requirements to be classified as exempt. Make sure that you are following all the rules for classifying your employees, because you can fall under a Department of Labor investigation at any time, unannounced. You will have to correct any violation and pay back wages if you are found to be not accurately conducting your payroll. Don’t try to take shortcuts because you think calculating your employee’s hourly wages will be too time-consuming or difficult.
Employers are required to make payments to the IRS for federal income tax, employer and employee social security, and Medicare. You need to stick to whichever deposit schedule you have established with the IRS, and make sure you deposit your payments on time. If you don’t make these payments you can be subject to fines. Keeping track of your payments is completely dependent on the accuracy of your time cards and the hours worked by your employees. You need to get organized to keep hours straight and taxes accurate.
Manually Adjusting Time Sheets
There are honest mistakes that come from being unfamiliar or unorganized with time tracking, but there are other steps that employers may take to deliberately alter hours worked to their own advantage. Because any weekly hours over 40 need to be paid overtime pay (time and a half), some employers are tempted to keep their employees under the 40-hour mark. It is acceptable to have a policy that employees are not allowed to work overtime hours, but absolutely not OK to alter hours or make adjustments to time sheets that do not reflect time worked. The Department of Labor will not look favorably at these deliberate time errors.
Calculating Overtime Biweekly
The FLSA states that overtime is to be calculated weekly for any hours worked over 40. You can see how calculating this biweekly could lead to not having to give employees overtime pay, if they work 35 hours one week and 45 the next. Make sure you are following all of the rules, and staying compliant with the Department of Labor. Keep great records, and calculate your overtime pay weekly. You will stay compliant, keep your employees happy, and be known as a great employer that compensates fairly.
Not Paying for All Time Worked
Especially if your employees have to travel, meet with clients, or perform duties that are outside of a traditional office, you may not be tracking all of the time that falls under the umbrella of “work.” The Department of Labor states that “time spent traveling during normal work hours is considered compensable work time.” Some types of waiting must also be paid, such as when an employee has to wait for equipment to be fixed. Mandatory trainings, meetings outside of work hours, and times when an employee must remain on-call are all events that need to be compensated. You need to keep track of these times and pay your employees accordingly.
Another thing that employers sometimes overlook is the need to check their employee’s timecards for mistakes. There can be a push to get the numbers done and into payroll as soon as possible, and double checking time cards might be the last thing you have time for. Even if mistakes are the fault of the employee, the Department of Labor considers it the employer’s responsibility to verify that all hours are correct. Mistakes could result in overpaying your employees (which could hurt your business) or underpaying your employees (which is a violation). You need to find a solution to tracking time, finding mistakes, and keeping great records that will help you have more time for your business. What’s the answer? Timeco!
The amount of mistakes, hours overlooked, regulations, and fines for violations can seem overwhelming to the small business owner. Don’t let timekeeping hold you back—you need time clock software that does all of the work for you! Let Timeco help you manage your employee’s time by tracking, organizing and categorizing time to be able to accurately pay your employees and remain compliant with the Department of Labor. Don’t waste precious time manually reconciling a time sheet, or trying to remember who worked when. You need a solution that can do all the time tracking for you, and that your employees can easily use. Timeco can help with lunch calculations, rounding, and overtime, and can solve most of these common pitfalls of time management that small businesses can fall into. Let Timeco help your business with our easy to use online employee time clock software. Get a free demo today!