Payroll Points

posted in: Human Resources 0

Somehow paying employees is never quite as easy as it seems like it should be. How hard can it be? Multiply hours worked by wage and that is what you owe, right? Wrong, of course, what with overtime and deductions. And even that apparently simple calculation has pitfalls.

First, how many hours were worked? It is the employer’s responsibility to accurately track hours worked and pay for all hours, to prove that they paid the wages owed. If the employer doesn’t keep track, the employee’s records will be used by a court – usually to the employee’s benefit. So don’t just ask employees to tell you their hours worked at the end of the pay period, or assume that they worked 40 hours each week. Time clocks are popular, but they don’t work for every job. If the employee keeps track of it, have them write it down, sign it, and turn it in each week or pay period so you have a chance to check it while you remember what was going on; then sign and file it.

You can round the time worked, but it had better not always come out in employer’s favor. Round it honestly rather than cutting off any time between quarter hours (or whatever standard you use).

The wage seems simple until you get to overtime. Vacation, sick leave, or paid time off doesn’t count toward 40 hours worked for overtime calculations, so someone who logs 48 hours in a week by working 40 hours and taking 8 hours of vacation doesn’t get overtime pay. Remember that salaried non-exempt employees get overtime if they work more than 40 hours/week; this will become more relevant if the new exemption regulations go into effect as planned. Calculation for employees who get bonuses or commissions can get truly hairy and should be reserved for people with lots of experience.

And finally there is the documentation. Montana requires detailed pay stubs, including hours worked, wage rate, total earnings, and all deductions; most payroll software and services will generate these automatically. Retain payroll records for three years; retain time cards, work/time schedules, wage deductions for two years.