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Throw a bucket of ice water on summer payroll problems

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in Centerpiece,Office Management,Payroll Management

As you gear up for employees’ summer vacation requests, remember that the Fair Labor Standards Act has a lot to say about working hours, calculating overtime when employees take a day off during the week and uniform policies. Here’s help navigating these choppy waters.

Too tan for a Monday?

July 4 falls on a Wednesday this year, so it’s likely that some nonexempts will take the weekend before as a long weekend and others will start their long weekend on that Wednesday.

Single most costly mistake: including vacation pay or holiday pay in employees’ regular rates when calculating their overtime rates. Vacation pay or holiday pay is idle time pay, which isn’t included in the regular rate calculation.

Example: Emily earns $15 an hour and works eight hours a day. She takes a paid vacation day on Friday; Monday-Thursday she works 45 hours, for a total of 53 hours.

Wrong way: She earns $600 in straight-time pay, $120 in vacation pay and $292.50 in overtime ($15 x 1.5 = $22.50 overtime rate x 13). Total pay: $1,012.50.

Right way: She still earns $600 in straight-time pay and $120 in vacation pay, but only $112.50 in overtime ($15 x 1.5 = $22.50 x 5). The eight hours of vacation aren’t counted. Total pay: $832.50.

Total savings for one employee: $180.

What if a nonexempt works 38 hours and then takes Friday as a vacation day? Again, no overtime is due, because she is paid for 38 hours of straight time, plus eight hours of vacation pay. The total equals 46 straight-time hours, but eight of those hours are for nonwork time.

No federal or state law requires you to pay for holidays, so if you close the office for Independence Day or Labor Day, you can save money by shaving holiday pay. You could, for example, pay nonexempts for eight holiday hours when they don’t work on the holiday, even if they normally work a 10-hour shift.

As for exempts, if you have a bona fide time-off plan, you can require that they charge the holiday time off to their leave banks.

Watch it: This strategy fails for exempts whose leave banks would result in a negative balance due to current debiting and for those who already have negative time in their banks; they must receive their full pay.

So long, farewell

The fact is, not everyone can take a long weekend. To allot time off equitably, you could institute half-day Fridays through Labor Day. To reduce work hours on Friday without reducing pay, lengthen the four preceding workdays. Since longer days may not sit well with employees (half-day Fridays notwithstanding), try combining longer days with short meal periods.

Warning: Shorten unpaid meal breaks to 30 minutes, but no shorter. Reason: The Department of Labor objects if unpaid meal periods are shorter than 30 minutes.


You may require employees to wear uniforms and deduct the cost from their pay as long as deductions don’t cut into their overtime pay or reduce their pay to below the minimum wage.

As a practical matter, uniform deductions can’t be made if employees are solely paid the minimum wage. It also means that, for employees who earn more than the minimum wage, in weeks they work overtime, deductions are made from their straight-time pay down to the minimum wage. They continue to receive their full overtime pay.

Key: Make sure state law doesn’t prohibit uniform deductions. California, for example, takes a strict view by mandating that employers pay for uniforms.

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