By 
The Fair Labor Standards Act of 1938 (FLSA) is a nearly 80-year-old law dealing with working hours, minimum wage, and overtime rules. It is largely responsible for guaranteeing that all employees in the U.S. are paid fairly and accurately. Over the years, it has gone through dozens of changes designed to keep pace with commensurate changes in the workplace. And because there have been so many revisions and updates, what used to be a relatively straightforward law is now a confusing myriad of regulations that can easily lead to non-compliance issues.
Some estimates based on U.S. Department of Labor data suggest that as many as 70% of America’s businesses are FLSA non-compliant, with the vast majority of them not even being aware of it. That’s a scary number. The unfortunate thing is that ignorance can take its toll, financially and legally.
Even if you don’t know your company is out of compliance, being found in such a state could have the Department of Labor holding their hands out to collect fees and penalties. In cases where noncompliance is intentional, prosecution is always a possibility.
There are lots of ways to be out of compliance with FLSA. Below are brief descriptions of three of the most common issues. If your business has any concerns about its own compliance, now might be a good idea to consult an attorney or consider outsourcing payroll to a competent third-party provider.
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Improper Overtime Pay Calculations
Regulations require that overtime pay is calculated based on a worker’s average hourly wages. That’s not a problem for people who are paid by the hour. It can be a problem for salaried workers and certain kinds of workers who receive extra pay such as sales bonuses and in-lieu-of-benefits payments. Their situations can be both complex and confusing.
Not fully understanding how to calculate overtime pay in some of the more complex scenarios is a good way to short-change employees and therefore be out of compliance with FLSA. This is fairly common as a couple of prominent court cases have recently demonstrated.
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Incomplete Record-Keeping
The FLSA not only requires employers to track worker hours and pay employees accordingly, but they must also maintain a complete record of hours worked and wages paid. To say records must be thorough and complete is to state the obvious. Companies whose records are incomplete are always taking the risk of being found non-compliant.
Representatives from BenefitMall (Online Payroll Services for Small Business & Tax Compliance | BenefitMall), a national payroll services provider, say the need for complete record-keeping is one of the many reasons employers should consider outsourcing their payroll to a third-party provider. Automated payroll software provides the kind of strong record-keeping companies need to stay in compliance.
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Confusing State and Federal Regulations
The FLSA allows the states to enact their own minimum wage requirements that may go above and beyond federal regulations. Dozens of states have done just that. As a result, business owners and payroll personnel can find themselves confused over what employees should actually be paid. More than one employer has inadvertently found him/herself in noncompliance by adhering strictly to federal standards without applying conflicting state standards as well.
The reality is that the FLSA, for all the good it has done for American workers, has also created a rather burdensome regulatory environment that raises compliance issues for a vast majority of U.S. employers. And until those regulations are simplified, noncompliance is going to be an issue.
The need to comply with FLSA is yet further motivation to consider outsourcing payroll to a company like BenefitMall. Outsourcing payroll reduces the risk of non-compliance due to ignorance.
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