How to address concerns when moving an employee from salaried to hourly

With upcoming changes increasing the federal annual wage minimum taking effect December 1, 2016 there may be some anxiety or discontent with some of your employees who will be moved from exempt (salaried) status to non-exempt (hourly).

The annual wage minimum requirement for salaried/exempt status will change from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) under this legislation.

When moving employees to an hourly classification under the new regulations, it’s helpful to understand the employee’s perspective.  Although the intent of the Fair Labor Standards Act is to protect employees from being overworked and underpaid, many employees perceive an hourly classification as having a lower status compared with those classified as salaried.

In delivering this message, here are a few tips that may ease their concerns:

  • When explaining the reclassification, explain that this change is based solely on legislation enacted by the U.S. Congress and has nothing to do with their job performance. Assure them that this is not a demotion, but a pay reclassification.  Explain to them that the change to hourly status is intended to assure that they are paid for overtime hours they work.
  • There also will be an adjustment phase. Employees that are now salaried may not be used to tracking their work hours or using a time-keeping system.  It is important to stress that this will be the new norm and that they must report all hours worked, including work from home whether via remote web or phone calls.
  • Each company will have different interpretations of flexibility in the workplace, but if your employees are used to a certain level of flexibility when with their schedules, you may want to continue that practice. Explain to them that they will have the same flexibility for doctor’s appointments, long lunches with an old friend, or leaving early on a Friday during the summer.  Make it clear that when they work 40 hours for the week, their weekly pay will remain the same.  But be sure they understand that if they do not make up this flexible time, their check will be less.
  • Keep an open door policy with your employees to address their concerns. It’s a good idea to map out potential paths for them to move into positions that remain salaried positions.  Help them understand what those positions are and direct them towards achieving their goals so they are able to move into those jobs.  While doing so, however, be sure to stress that their value and responsibilities within the company in their current position has not changed.  Only their pay structure has.

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Frank Lewandowski, PHR, SHRM-CP

I-9 Compliance: How much is it costing you?

The federal Form I-9 is deceptively simple, yet crucial in every new hire process. The form is designed to help employers verify the identity and certify that each employee can legally work in the United States. Can you imagine being fined hundreds of dollars because an employee forgot to sign or date it? Multiply one mistake by hundreds or thousands of employees and the result is a huge burden for business owners who fail to realize the importance of properly completing the I-9.

The U.S Immigration and Customs Enforcement, referred to commonly as ICE has been hitting companies hard with I-9 audits recently, and there is no sign of them slowing down. According to a recent Associated Press article, audits of employer I-9 forms increased from 250 in 2007 to more than 3,000 in 2012, and this number will likely continue to grow. ICE handed out more than $13 million in fines in 2012 based on violations discovered during these audits.

The USCIS states that fines for improper completion and retention and not making I-9 documents available for inspection range from $100 to $1,100 for each I-9. Fines for purposely hiring or continuing to employ unauthorized employees range from $250 up to $11,000 per offense. Employers who show a continued pattern of hiring unauthorized workers are liable for criminal penalties of as much as $3,000 per employee and may be subject to a minimum prison penalty of 6 months.

All companies, regardless of size, state, or industry, are subject to an ICE I-9 audit. A large clothing retailer reached a settlement with ICE of more than $1 million dollars in fines regarding I-9 documentation violations discovered during a 2008 audit. A drywall company was fined $173,250 for 225 separate I-9 paperwork violations. Additionally, a worldwide staffing company has been fined $227,000 in civil fines for improperly completing the Form I-9.
As you can imagine, these fines have greatly impacted companies worldwide, and could have been prevented with proper training and knowledge.  So what can a business do to properly protect itself?

The rules around I-9 forms can be very specific and sometimes confusing. As your trusted HR partner, BCN takes pride in ensuring our clients are in compliance, and trained properly in the I-9 paperwork procedures, avoiding the headache and stress of massive fees and penalties. If you have any questions or would like more information about  Form I-9, contact your HR specialists at BCN Services.

 

 

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Taylre Reed, Partnership Manager

New overtime exemption rules enter final review stage

After months of speculation, the U.S. Department of Labor (DOL) advanced its final draft of new requirements for overtime pay exemption rules to the Office of Management and Budget (OMB) on March 14, 2016.

This step marks the final stage before implementation as OMB completes its review and releases the new regulations. The OMB’s review phase may take up to 90 days, but approval may occur sooner. While it is difficult to pinpoint a timetable, experts are forecasting the release for June or July 2016 and implementation on or about September 2016.

So what should employers do now? First and foremost, begin planning. Taking a wait-and-see approach may be appealing, but there are strategic planning steps which should be taken now:

Understand the proposed new rules

  • The standard salary test amount changes. Qualifying employees must be paid at least $970 per week ($50,440 annually) under the new rules to be exempt from overtime pay. The current minimum is $455/week ($23,600 annually)
  • A provision would increase the salary test level on an annual basis. This adds to to current regulations and adds a formula by which the salary test will be increased each year, indexed to inflation
  • For highly paid employees, the total compensation threshold will increase from $100,000 to $122,128,and these levels would also be increased each year
  • Another change under consideration is the duties test, establishing a minimum amount of time an employee may perform exempt vs. non-exempt tasks and identifying a minimum amount of time for a duty to be considered a primary duty. Although the proposed rule does not offer specific changes, there has been discussion about making this change in the new rules.

Analyze your current positions and exempt classifications

  • Identify positions and employees who may be reclassified from exempt to non-exempt
  • Evaluate the need and frequency of each position to work more than 40 hours per week
  • Redesign pay structures and determine new pay rates.
  • Review other policies (including benefits, bonuses, schedules, overtime approval) and how they will apply to those who will be newly classified as non-exempt.

Build a communication and training plan

Focus on:

  • Newly classified non-exempt staff
  • Supervisors and Managers
  • Others within the organization

Evaluate non-exempt status changes on an ongoing basis

Look at potential impact on:

  • budgets in current and future year
  • schedules and workload
  • HR policies and practices

Also, consider additional training that might be required.

For more, see the U.S. Department of Labor website.

 

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Susan Price, Strategic Account Manager

Consider impact of daylight-saving time for hourly worker

Many people are familiar with the axiom “spring forward and fall back” to help them remember in which direction to change the clock during daylight-saving time transitions.

However, questions may linger for employers about pay practices for those employees that are “on the clock” during the time change.

Non-exempt employees, who are generally paid on an hourly basis, are entitled to be paid for the hours they actually work. For example, in the fall when employees may only be scheduled for an eight hour shift but end up working nine hours due to the time change, they must be paid for nine hours. In the spring, if a normal work schedule constitutes eight hours, but the employee works only seven hours due to the time change, the employer need only pay seven hours of time worked.

Some companies may decide to pay a full eight hours so that their employees don’t lose regularly expected compensation, but there is no obligation for them to do so.

Employers and scheduling supervisors should not “balance out” time over the year in which an employee works during the time change in the spring and in the fall. Hours should be paid within the time period in which they are worked.

Other questions about compensation or pay practices? Our professional staff at BCN can help. Call us at 800-891-9911 if we can assist you and your business.

 

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Sue Kester, HR Manager

Federal government decreases Standard Mileage Rate for 2016

The federal government has decreased the allowable per-mile reimbursement for employees who drive their vehicles for business and using their vehicles for medical care and moving expenses.

Employers may reimburse their employees for operating an automobile for business, charitable, medical, or moving expense purposes. They can calculate those reimbursements using a variety of methods including: travel days, miles, or the fixed-rate allowance.

Each year the Internal Revenue Service evaluates the Standard Mileage Rate to determine whether the rate is reasonable based on driving costs and whether the rate should be increased, decreased or remain the same. The IRS takes into account costs such as the price of gasoline and oil and other expenses including insurance and repairs.

New published rates include:

  • The standard business mileage rate for auto expenses has decreased to 54 cents per mile for 2016 (from 57.5 cents per mile in 2015).
  • The rate for charitable uses remains the same at 14 cents per mile.
  • The rate for driving for medical care has decreased to 19 cents per mile for 2016 (from 23 cents per mile for 2015).
  • The rate for deductible moving expenses using an automobile has decreased to 19 cents per mile for 2016 (from 23 cents per mile for 2015).

The maximum standard automobile cost under a fixed-and-variable-rate (FAVR) allowance method has decreased from $28,200 for 2015 to $28,000 for 2016 (excluding trucks and vans). The standard cost under a FAVR allowance for trucks or vans has increased from $30,800 for 2015 to $31,000 for 2016.

If the allowance paid to an employee exceeds the amount allowed by the federal government, the excess amount must be reported as wages and is subject to income tax withholding and payment of Social Security, Medicare and federal unemployment taxes.
For more about “Business Use of Car,” visit the IRS website at: https://www.irs.gov/taxtopics/tc510.html or contact the experts at BCN if we can answer your employment questions, including those about employee reimbursement policies and current guidance and legislation.

 

 

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Susanna Achatz, Payroll Manager

Minimum wage laws continue to be a hot employment topic

BCN Services is a full service Human Resources partner, and one of the ways we help keep our clients compliant is to ensure they are updated regarding changes in the minimum wage laws in their state and or localities. The minimum wage and tipped wage requirements are among the main topics of discussion amid the current political and economic news cycle.

BCN has updated all our clients affected by the recent changes in Minimum and Tipped wages throughout the country. We are also supplying updated compliance posters to all our customers affected by the changes.

Inform yourself about minimum wage levels

How much do you know about the minimum wage and tipped wage levels in the U.S.?

The federal minimum wage has not increased since 2009, although many states have adopted new, higher minimum wage standards. The current federal minimum wage is $7.25 per hour and $2.13 per hour for tipped workers.

There are 7 states currently with either no minimum wage or a minimum wage rate listed below the federal rate. In these states, states the federal minimum wage applies. They include:
Alabama, Georgia, Louisiana, Mississippi, South Carolina, Tennessee, and Wyoming.

Twenty three local municipalities have adopted minimum wages above their state minimum wage. They are: Albuquerque, New Mexico; Berkeley, California; Bernalillo County, New Mexico; Birmingham, Alabama; Chicago, Illinois; Emeryville, California; Las Cruces, New Mexico; Louisville, Kentucky; Montgomery County, Maryland; Mountain View, California; Oakland, California; Palo Alto, California; Portland, Maine; Prince George’s County, Maryland; Richmond, California; San Francisco, California; San Jose, California; Santa Clara, California; Santa Fe City, New Mexico; Santa Fe County, New Mexico; SeaTac, Washington; Seattle, Washington; and Sunnyvale, California.

The following states have increased their minimum wage in the past 6 months. The old minimum wage is in parentheses. All wage rates noted are per hour.

Michigan – effective January 1, 2016:

Minimum Wage: $8.50 ($8.15)
Tipped Wage: $3.23

Note: Michigan also has scheduled increases with annual indexing beginning April 1, 2019:
January 1, 2017 – $8.90
January 1, 2018 – $9.25

Other states include:

Alaska – effective Jan., 1 2016
Minimum Wage: $9.75 ($8.75)
Tipped Wage: $9.75

Arkansas – effective Jan. 1, 2016
Minimum Wage: $8 ($7.50)
Tipped Wage: $2.63

California – effective Jan., 1, 2016
Minimum Wage: $10 ($9)
Tipped Wage: $10

Colorado – effective Jan. 1, 2016
Minimum Wage: $8.31 ($8.23)
Tipped Wage: $5.29

Connecticut – effective Jan. 1, 2016
Minimum Wage: $9.60 ($9.15)
Tipped Wage: $6.07

Hawaii – effective Jan. 1, 2016
Minimum Wage: $8.50 ($7.75)
Tipped Wage: $8.50

Massachusetts – effective Jan. 1, 2016
Minimum Wage: $10 ($9)
Tipped Wage: $3.35

Minnesota – effective Aug. 1, 2015
Minimum Wage: $9 ($8)
Tipped Wage: $8

Nebraska – effective Jan. 1, 2016
Minimum Wage: $9 (8)
Tipped Wage: $2.13

New York – effective Dec. 31, 2015
Minimum Wage: $9 ($8.75)
Tipped Wage: $7.50

Rhode Island – effective Jan. 1, 2016
Minimum Wage: $9.60 (9)
Tipped Wage: $3.39

South Dakota – effective Jan. 1, 2016
Minimum Wage: $8.55 ($8.50)
Tipped Wage: $4.28

Vermont – effective Jan. 1, 2016
Minimum Wage: $9.60 ($9.15)
Tipped Wage: $4.80

West Virginia – effective Jan. 1, 2016
Minimum Wage: $8.75 ($8)
Tipped Wage: $2.63

BCN will continue to keep you up to date and in compliance with all federal, state and local laws. By allowing BCN to handle your administrative functions, as well as your Human Resources needs, you can continue to focus on your business’s bottom-line results.

Contact BCN Services today to learn more about our programs.

Direct deposit has many benefits over a traditional, paper paycheck

Employees come to work every day for many reasons, but the one day that all employees look forward to is payday. How employees receive their wages on payday can impact both the employer and the employee.

Although there are other options, the most common methods of payment are either by check or direct deposit.

By encouraging employees to sign up for direct deposit, employers eliminate the risk of lost/stolen checks, altered checks, and checks that are never cashed. Employers that have 100 percent of their employees signed up for direct deposit will increase efficiency throughout the workplace.

Employees that choose to receive a live check are at a disadvantage. Although they may receive their check on payday, they must take time out of their day to obtain their check, take it to the bank and cash or deposit it. Depending upon where the employee banks, there may be a waiting period before the funds are available for use.

On the other hand, direct deposit for employees:

• Allows them to receive their pay sooner. It automatically goes into an employee’s bank account, even if they are on vacation or away from the office
• It saves them from making a trip to the bank and allows easy, faster access through electronic transfer, making things like online banking easier
• Safeguards against forgery and theft which are possible with paper checks
• Allows employees to select more than one account in which to distribute their pay. An employee can put some money into savings and some into a checking account, for example.

If you have questions about direct deposit or other payroll matters, please call BCN Services at 734-994-4100 or toll free at 800-891-9911.

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Susanna Achatz, Payroll Manager

U.S. Supreme Court decision on gay marriage impacts some employer-sponsored benefits

On June 26, 2015, the U.S. Supreme Court of the United States ruled that the 14th Amendment to the United States Constitution compels all states to issue marriage licenses to two people of the same gender and recognize legal marriages between two people of the same gender.

The Obergefell v. Hodges decision was sweeping, all but ending a decades-long battle to bring marriage equality to gay couples. Thirty seven states and the District of Columbia already recognized same-gender marriages before the ruling. Michigan was among 13 states that banned gay marriage through a state constitutional amendment defining marriage to be between one man and one woman.

With this historic decision, all U.S. states and territories can no longer ban same-gender marriage either by state constitutional amendment or popular ballot vote.

Although the decision comes from the highest court of the United States, there are many unanswered questions. The decision did not address matters of discrimination based on religious beliefs, nor did it lay out a step-by-step plan for employers and health insurers to handle the new legislation. This blog specifically focuses on the impact the SCOTUS decision has on employer-sponsored benefits.

Fully insured health plans are now legally bound to recognize same-gender marriages exactly as they would marriages of opposite genders. Although 2013’s United States v. Windsor SCOTUS ruling extended favorable tax treatment on premium dollars paid by employees towards same-gender spouses and dependents coverage, that ruling did not extend those benefits nationwide. The favorable tax treatment of premium dollars now applies to same-gender married couples in every U.S. state and territory.

Small-group employers have always had the option of excluding spousal coverage under their benefit plans. Now, however, the exclusion must be uniform and not directed at same-gender marriages. If an employer disqualifies spousal coverage or requires spouses to take insurance through their own employer prior to enrolling in the company’s plan, the condition must be applied to both same-gender and opposite-gender spouses.

Employers with self-funded medical plans are not forced by the Obergefell ruling to allow same-gender spouses to enroll in their group health plan. It is advised that employers with self-funded plans consider the potential for litigation if they choose, at this point, not to allow same-gender spouses to enroll in their group health plans.

There are still several roadblocks and gray areas due to this ruling: How do groups handle their plan if they already allowed “domestic partners” to enroll? Is there a time limit that vendors will allow domestic partners to become legally married before they disallow coverage? If employers choose to continue allowing domestic partner coverage for same-gender couples, they should be sure to open it to opposite-gender domestic partners, if they did not before.

As always, BCN Services will guide clients and employees through these complexities as they occur. Please encourage your employees to call us with any questions they may have. Timeliness can play a factor, depending on the specific situation

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Frank Lewandowski, Partnership Manager

Be prepared for new federal rules governing overtime exemption

The U.S. Department of Labor has finalized its recommendations for revisions to the laws governing employees considered exempt from overtime.

These recommendations have been submitted to the Office of Management and Budget and are expected to be substantial changes to the current law. The goal of the recommendations is to significantly increase the number of employees eligible for overtime.

Currently, employees are considered exempt from overtime under these situations:

  • Employees must be paid a salary of at least $455 per week to qualify as exempt form overtime (time and one-half for any hours worked over 40 in a pay week).
  • Job duties must include factors such as:
    • The employee must have significant influence in decisions of hiring or firing.
    • The manager should have significant authority to make decisions on matters that affect the operations of the business.
    • A significant portion of the manager’s time must be spent “managing” the business. Management responsibilities should not be incidental to the employee’s work.

The proposed rules are expected to increase the minimum salary to as much as $900 per week or more. This is a significant increase that could affect the bottom line for many companies.

Additionally, the factors the DOL uses when determining if an employee is exempt (called the duties test,) are expected to change as well. The new duties test is expected to include hard-and-fast rules requiring exempt employees to spend at least 50 percent of their time executing management or administrative duties.

Time spent in “exempt” functions is not the only consideration when determining exempt status. Other considerations include:

  • The relative importance of the executive duties as compared with other types of duties
  • His or her relative freedom from supervision
  • The fact that his or her salary is greater than the wages paid to other employees for the type of nonexempt work performed by the executive/manager

Expect to see significant publicity once the final rules are announced. They could potentially affect millions of employees. The DOL has begun using its website to publicize new rules and laws, even creating downloadable phone apps to assist employees in calculating their overtime. The new requirements will likely be front page news on websites, social media sites and television news. Employees will become aware of the changes quickly.

With significant changes to the rules for overtime exemption, it is imperative that employers conduct an audit of their current exempt employees, correct any misclassifications, pay for any unpaid overtime and be prepared to make necessary changes to remain in compliance of the new rules.

As always, BCN stands ready to assist you in evaluating your exempt employee’s status. Please contact your Partnership Manager to assist in a review of your current employees’ status and to prepare to make changes as required by any new rules or laws.

 

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Jeff Walsh, Partnership Manager

Minimum wage increases in Michigan take effect starting Sept. 1

As you may be following in the news, Michigan’s minimum hourly wage has been approved to increase to $9.25 per hour by 2018.

This will be accomplished through a series of incremental bumps with the first one happening Sept. 1, 2014.  During August, be sure to watch your payroll packets for a copy of the updated compliance posters that must be posted in your workplace.

In addition to this first bump, the next increase will occur on Jan. 1, 2016 to $8.50 per hour.  From there it will move up to $8.90 on Jan. 1, 2017 and to $9.25 on Jan. 1, 2018.  In legislating these increases, lawmakers determined that a gradual increase would be better for employers who might need time to adjust to paying employees more.

The law also increases the hourly minimum for employees who receive tips from $2.65 per hour to $3.52 per hour.  Employers with these employees need to be aware – as always – that if the combined hourly total of tips received and wages does not meet the state minimum wage, that it is incumbent upon the employer to make up the wage difference.

  • Below is a link to the new Michigan Minimum Wage and Overtime poster if you are looking for a sneak preview, and as always, please contact your Partnership Manager at BCN Services with any questions or concerns regarding your individual employment strategy:Email: hr@www.bcnservices.com
  • Phone: 734-994-4100 or 800-891-9911
  • Contact us here

Minimum wage and Overtime Poster

 

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Sue Kester, HR Manager