I recently had a discussion with an associate (also an payroll consultant) about the regular rate of pay and payroll systems in general. Unfortunately the question we both had, we could not fully answer. So I am turning to my blog followers to help me out. When I started in payroll we did payroll by hand, including the regular rate of pay calculations. Of course, systems have improved since 1977. But my question is…which current systems (whether in-house or service bureau) do regular rate of pay calculations? For example, I give a bonus to an employee for finishing a project on time (nondiscretionary bonus) and he earned it in the same week it was paid. For this scenario would your payroll system do the regular rate of pay calculation? Or would you have to do it by hand and add it in? Second example, an employee receives a monthly commission on sales (hourly employee). He is paid his commission on July 15th for the month of June. Would your system be able to recalculate the additional overtime due? Or would you have to do it by hand (Excel spreadsheet)?
If your system does not do the regular rate of pay calculation, did you know this when you bought the system or signed up for the service bureau?
I appreciate any input you might have on the subject. Please include the name of the system if you can do so. Also please note if you had to have a special program written to handle the calculations.
Yesterday the California Senate passed SB 562, The Healthy California Act. This bill would create the Healthy California Program to provide comprehensive universal single-payer health care coverage and a healthcare cost control system for the benefit of all residents of the state of California. It would be funded by a combination of employer and employee payroll taxes. Of the 33 developed nations in the world 32 of them have what is known as universal healthcare. The lone exception to this, of course, is the United States. Universal healthcare, however is not defined as government only healthcare, but can include both public and private insurance and medical providers. So if this bill actually passes the assembly and the financial aspects are resolved it would put California on the list of countries with universal healthcare. This would be a very unique situation. One of our states has universal health care but the country does not. But I think the bigger question for this blog is: “why don’t businesses embrace universal health care?”
And I’m not the only one questioning this. Warren Buffett has stated that other countries have gained a five or six point advantage over the United States because of healthcare spending by employers. The National Federation of Independent Business conducted a survey of small business priorities and problems and found that the cost of health insurance is the most severe problem facing American small business today. In fact 52% of small business owners identified it as a critical issue. The Bureau of Labor Statistics (BLS) puts the cost of healthcare in 2016 for employers with more than 500 workers at $4.28 per hour or 9% of the total compensation costs. For employers with 100 to 499 employees the insurance costs are $2.77 per hour worked or 8.5% of total compensation. Now some will say that this cost is due to the Affordable Care Act. But the increase under the Affordable Care Act for employers with more than 500 employees as compared with the cost in 2006 was 1%. For those employers with under 500 employees it was 2.5%. However this statistic does not reflect that many of the employers with under 500 employees did not offer health insurance in 2006. So why do we continue to put this burden on employers and why do they continue to fight to keep it?
Using the 2006 figures so that we do not factor in Obama care, if I were to propose an 8% tax on all employers with over 500 employees there would be riots in the streets. Yet that’s what employers were paying for healthcare. So if we were to take this 8% as a payment from each employer and add in the cost the employee paid could this be the beginning of universal healthcare for the United States. Think about it for a minute. Employers would no longer need to contact insurance companies, negotiate costs, and have someone in the company to oversee the program (an additional cost of a salary) nor have someone in Accounts Payable pay the bill. Would it have to be a federal program? Most countries that have universal healthcare have a combination of national and municipalities handling the programs. The tax would be on the federal level but the healthcare itself is provided on the local level since those are the ones that usually understand what the community requirements are.
Would this help us become more competitive in the world? Would it help employers become more financially solvent? Would it get health care for all the citizens of the United States? The answers to those questions, of course, remained unanswered as of today. But unless we begin to look into shifting the costs of health care away from employers we will never know.
Wage theft is getting a lot of attention lately. In my May 30th blog I discussed an EPI report that went into detail concerning wage theft in the United States. But is wage theft even more rampant than that report indicated? A recent article in the New York Times concerns how Uber is just discovering they have been miscalculating the commissions paid their drivers and are getting ready to pay tens of millions in back payments. But a driver’s advocacy group in New York is indicating that the company is also making its drivers swallow the per cab ride tax burden imposed by New York. This practice, according to the New York Taxi Workers Alliance amounts to wage theft. It all boils down to how the contracts are interpreted and only the courts will decide in the end. But it is food for thought. Are major corporations guilty of wage theft as a matter of business practice? This is a disturbing questions that must be answered.
What do you think? Is wage theft a serious problem in the U.S.? Take our poll or leave a comment.
I just completed my registration for the American Payroll Association’s 2017 Virtual Congress & Expo. This is a free event for APA members which is held every year. This is the 8th year for the event and the 6th one I will be attending. This is the online companion to the Annual Congress. But for me it is the only one I can usually attend. I love attending the live, real world congress. I get to meet up with associates, network and gain valuable knowledge. However, my schedule just doesn’t permit me to take the time off to attend most years. But virtual congress is different. I can attend in the morning, take time to do one of my webinars and be back in the afternoon. I still get to network with old friends and make new ones using the networking lounge’s chat boards. I get to see all who are attending and can even contact attendees directly to say hello. The webinars are always educational. This year we are looking at such subjects as:
State Unemployment Rates: How Did They Arrive at Our Rate?
Is this Taxable?
Calculations Your High School Teacher Never Taught You
I am really looking forward to these webinars. Virtual congress is the next best thing if your work schedule or budget just won’t let you attend Congress. So I hope to “see you there”. By the way did I mention that you can earn up to 15 RCHs for attending the webinars. And if you register but can’t attend everything, after the virtual congress concludes, the webinars are then open as on-demand webinars until August. This is great for me. I can catch up on the ones I had to miss due to work or that were scheduled at the same time as another topic I wanted to check out.
This week the House of Representatives passed The Working Families Flexibility Act of 2017, H. R. 1180. The purpose of this bill is to amend The Fair Labor Standards Act of 1938 to allow employees to receive compensatory time off instead of payment for overtime worked for employees working in the private sector. It sponsors say that this gives employees in the private sector the same flexibility that employees in the public sector have enjoyed for a number of years. In essence, being able to choose between being paid for overtime or getting time off at a later date. I have not yet made a decision on this bill as to whether or not I support it. It has good points but it also has a lot of flaws.
First the good points:
the bill does require that the employee agree to, in writing, receive comp time instead of being paid for the overtime worked. If the employee would prefer to be paid over time then they have to be paid overtime, at least in theory.
The bill also requires that the employee be given opportunity to take the comp time when requested, as long as it does not interfere with business operations.
The bill does require that the employee be cashed out upon termination, voluntary or involuntary, or at the end of a 12 month period. This in theory prevents overtime from never being paid.
The bill permits an employee to opt out after agreeing in writing to be paid compensatory time and does not permit compensatory time to be as a condition of employment.
The bill does not allow new employees to be forced to take compensatory time instead of overtime. The employee must work at least 1000 hours for the employer before they can agree to be pay compensatory time.
The bill sunsets after five years and requires after two years that the GAO submit a report outlining whether or not there were complaints alleging violation of the rules made to the Secretary of Labor or the Department of Labor. It requires an accounting of any unpaid wages, damages, penalties, injunctive relief, or any other remedies that were obtained or sought by the Secretary Of Labor.
However there are flaws:
first the premise that public sector employees “enjoy” the privilege of compensatory time in lieu of overtime. Public sector employees did not come under the FLSA until 1985 when it was mandated by a court decision. Private-sector employees have been under the FLSA since 1938. The only reason the comp time in lieu of overtime was permitted is because it was written into many cities, counties and states requirements because they were spending public money. It was never something that was negotiated or requested by the employees themselves.
Many studies in the United States show that employees tend not to take all of the vacation they are due because they can’t get the time off from their employers. So my question is if they can’t get time off to take vacation that has been given them how will they be able to take off using compensatory time? Especially when the bill does not state that they must be given the comp time when requested but only if it does not interfere with business operations. And how many of us have not been able to take our vacation because our boss says I can’t give you the time off right now.
If not able to take the time off due to business operations then what’s the purpose of having comp time except to delay paying the employee overtime that was rightfully do. I understand that taking time off does affect business operations and if I’m requesting vacation I can understand that my boss can say not at this time. Because in essence vacation is not something that I actually worked for, but a benefit my boss is offering me. But compensatory time off is not the same as vacation although this bill seems to treat it that way. This is money that I’ve already worked for and am already due. It is not a benefit that my boss gets to allow me to take at his or her convenience.
My biggest problem with this bill is the fact that even though it says that the GAO will present a study on whether or not there were violations the fact is that the Labor Department collects hundreds of millions of dollars each year for violation of simple minimum wage and overtime rules. These rules have been in effect since 1938 and yet employers still violate them on a regular basis. Is this just adding one more area that employees will have to sue their employers through the DOL to get their money? Especially lower paid or minimum wage employees. Is this one more thing the employee will have to be aware of and make sure they are being paid properly?
Compensatory time off bills have passed the house many times in the past but have never gone past the Senate, usually dying in committee. But these are not normal times so we will have to wait and see.
What do you think? Take our poll. Are you for or against The Working Families Flexibility Act of 2017?
The Senate confirmed Alexander Acosta as the 27th Secretary of Labor yesterday. The swearing in ceremony was conducted this morning by Vice President Mike Pence. I sent a tweet over to the new Secretary this morning wishing him well in his new job protecting the American worker. Now we need to wait and see where the new Secretary will take the DOL. There are quite a few outstanding issues, including the delay on the changes to who is entitled to overtime, left from the Obama Administration that the new Secretary will have to deal with. So will Mr. Acosta be a good Secretary of Labor? Only time will tell us that.
We all knew that when President Obama called for changes to the exempt rules under the FLSA and the Department of Labor began the process of implementing those changes that there would be challenges by Congress. The “Overtime Reform and Enhancement Act” was introduced on Friday, July 15th. The bill requires the salary level changes be done in increments and does away with the automatic updates. But does Congress have history on their side to actually challenge the new rules? If we look at history, the answer is no. History is on President Obama’s side, even for the automatic updates, which have been proposed in the past several times. Changes of the nature being done (raising the salary level) have always been under the purview of Presidents, their Secretaries of Labor and their Administrators for the Wage and Hour Division. They have however, been few and far between. The first level was set at $30 per week in 1938 under President Franklin Roosevelt and his Administrator Elmer F. Andrews. It slowly raised up over the course of the years, often with professional and administrative employees being paid more. It was increased to $55/$75 per week in 1949 under President Truman and his Administrator William R. McComb; to $80/$95 per week in 1959 under President Eisenhower and his Administrator Clarence Lundquist; to $100 per week for executives and administrative, $115 per week for professional in 1963 under President Kennedy and his Administrator Clarence Lundquist. In 1969 hearings were held again to increase the salary level. This time they would increase to $125 per week for executive and administrative and $140 for professional employees beginning in early 1970 under President Johnson and his Administrator Robert D. Moran. During the hearings it was suggested by union leaders that there be a mechanism put in place to increase the salary level automatically to eliminate the lengthy periods which normally occur between revisions, thus keeping the salaries current and meaningful. But this was not incorporated. Amazingly enough there were only two changes to the salary level since 1970. First under President Ford (begun under President Nixon) in 1975 and then again under President George W. Bush in 2004. Under Ford and Administrator Betty Southard Murphy they were raised to $155 per week for executive and administrative employees and $170 for professionals effective April 1975. Again at this time Murphy pointed out that the thresholds had last been updated in 1970 and were increasingly out of date. She referenced that the Consumer Price Index may be utilized as the basis for updating the levels but did not include it in the final proposal. The salary level remained at those rates for the next 29 years.
The issue was not ignored by subsequent presidents it just never made it out of the regulatory agenda to fruition. It was proposed in 1979 under President Carter but tabled in 1985 under President Reagan. Under President Clinton it was put forth with a target date of September, 1993 but no action was ever taken on it. It remained on the agenda but no timetable was ever set. Then under President George W. Bush and his Administrator Tammy McCutchen, a major overhaul of all the requirements for exempt employees, including the salary level tests, were implemented. The salary level was raised to $455 per week for all exempt employees and a new category was added for the highly compensated. This category had a salary level of $100,000 per year. It was during this last update that Congress actually attempted to block the new regulations. Several amendments were added to various bills calling for defunding of the Department of Labor in an effort to stop the regulations from taking place. It was not the levels that were in dispute but the overall changes made to the jobs duties tests that caused the outcry from Congress. It was felt that too many employees would lose overtime protection under the new regulations. Stand alone bills were introduced as well as hearings conducting in both the house and senate. But in the end the regulations were implemented in April of 2004. This was the final update to the salary level until the new rules scheduled to take effect on December 1, 2016.
So the new proposed legislation of the “Overtime Reform and Enhancement Act” which is attempting to delay the implementation of the new salary levels does not have history on its side. Congress normally does not and generally cannot interfere with this type of regulation. But you never know in this day and age. We will just have to wait to see which side wins. But if history is any indicator, my money is on the DOL.
Yesterday I attended the second day of the APA’s Virtual Congress. I found the webinars highly informative and loved the interaction in the chat room. One of the webinars I attended live was the “Developing a Successful Payroll Service Delivery and Staffing Model” presented by Robert Gerbin, SPHR, who is a Global HR and Payroll Operations Consultant for Ernst & Young, LLP. While the webinar contained excellent information on staffing and maintaining a payroll department, Mr. Gerbin brought up a unique question that I have never encountered before. And what was this question? Mainly should the Payroll Department be called “The Payroll Department”? So why should be change our name? According to Mr. Gerbin, since payroll departments do so much more than “process payroll” why not make the name reflect the actual work being done. Payroll is both a tactical and a strategic business process. There are tremendous responsibilities. Failure to carry out these responsibilities correctly and with deadly accuracy can result in heavy fines, have a negative impact on operations, severely damage employee moral and result in negative publicity to the company. The title proposed is an excellent one. Payroll Services. We process payroll, handle general ledger interfaces and files, administer garnishments, interact with management, process benefits, and withhold, administer and report taxes. Why not let our name reflect that? Just as when “personnel” became Human Resources we should become Payroll Services.
I have been following the story of Jon Stewart and how he is attempting to get a bill passed by Congress to address the health issues of the first responders who save thousands of lives on 9-11. He got the bill passed five years ago by shaming Congress but now it is up for renewal. The thing to remember is that these people were employees doing their job no matter what the risk to themselves. Payroll professionals should get behind Jon Stewart and demand that Congress help these American employees with the 9/11 related illnesses they are not only facing on a daily basis but dying from. The bill, James Zadroga 9/11 Health and Compensation Act is being held up for purely spiteful political reasons. I don’t care if you are a republican, a democrat or an independent. We should not be playing politics with employee’s lives who risked everything, including their own life, to save others. Stewart is urging people to use the hashtag #WorstResponders to contact congressional representatives on both sides of the aisle. Tell your representative and senator to pass the bill now.
I am constantly asked for recommendations for products from webinar attendees and even through e-mails. These range from reference guides to entire payroll systems. Normally I never recommend products or books or really anything including payroll systems and software. Why don’t I you might ask? Its very simple… I am not paid to do so, so why should I. That sounds harsh I know. But I also think it kind of cheapens a recommendation when it is given if that person constantly keeps recommending everything from soup to nuts because they are paid to do so. Though the money would be nice, if I am being honest, but no one has approached me with a check to recommend their product or book or system so I don’t, it’s that simple. Even with that in mind, there is one area that I am asked repeatedly for the same recommendation. This area is California wage and hour law. I am constantly asked by webinar attendees and others if I know of a good, reliable source on California wage and hour law. Especially lately because of the the new sick leave law that is now effective. The answer is always, yes I do. So I am going to break one of my little rules and make a recommendation for this one topic…free of charge. For a top-notch reference on California wage and hour law I recommend the Wage and Hour Manual for California Employers by Richard J. Simmons. The 18th edition has just come out which covers the new California sick leave law and I have already bought my copy (I paid full price like everyone else). I have used this manual since the early 90s and it has been a staple in my reference library. If I get a question on California wage and hour law it is the one source I go to. For full disclosure I do know Richard Simmons on a first name basis to say hello to but that is all. We have served as speakers for the same conferences and I attend his personal wage and hour law seminars every couple of years to update my knowledge on this difficult subject. But he has never approached me for a recommendation on his books. I just use them and I want to pass this along to other payroll professionals who may need a reference guide in this area.