Paying for What You Wanted

“I’m hiring an assistant and have found a really good candidate, Jane. I had planned to pay $19 to $22 per hour but Jane was only making minimum wage at her last job so I know she’d be thrilled by $17. Do I have to offer her something within the range, even if she doesn’t know the range?”

You’re just assuming she doesn’t know the range. Current California law requires you to post the range on any ads so it’s hard to get away from paying within that range. Even if you could get away with paying below the range you created, there are several reasons why you should stick with your original range, regardless of how low Jane was paid previously.

The best plan is to pay for what the job is and then hold the person accountable for doing the job. You created that range and it should represent the level and quality of work you expect. Offering a lower amount just lowers those expectations.

In addition, no matter how confidential we like to believe wages to be, employees talk… and those conversations are protected by California law stating you cannot stop them from discussing wages. Even if there are no other employees, it seems confidential information is rarely totally secure within the company. What happens when Jane learns you had planned on paying more or discovers other employees with fewer responsibilities are earning more?

Starting a position at too low of pay often means, that to retain Jane, you’ll need to provide an “equity increase” to bring her up to the level in the marketplace. The conversation about an equity increase is very hard because you are admitting you originally lowballed her. If you don’t eventually pay in the range of other companies, you take the risk of losing her to another company.

This mindset of paying only a little above what you must pay, instead of what the position is worth, has been the reason certain laws are currently in place. Even if you’re only focused on the money, keep in mind the cost of replacing Jane will be far greater than paying her a fair wage from the start.

We like knowing we can hold the employee accountable for the work itself because she’s receiving a fair wage for the level of her skills and responsibilities. What do you like knowing?

Paying Late is a Red Flag

“I sometimes forget about the deadline to process payroll so paychecks may end up a few days late. Someone told me that’s a problem. Why?”

Not only do employees dislike late paychecks (no matter what they tell you) but California has a law against that practice. In addition, the law specifies exactly when employees must receive their money… and you can be fined if you’re not complying.

You are legally obligated to post a notice specifying the details of your regular paydays. When a holiday or weekend interferes with a regular payday, you can lawfully choose to pay employees either on the business day before the holiday or weekend or the first business day after. Whichever you choose, you must be consistent with that schedule and include that on the posted notice.

Compare your pay practices with the following:

  • Employees paid weekly must be paid within 7 days from the end of that work period. For example, if the company’s workweek is Monday through Sunday, time worked during that week must be paid no later than the next Sunday (7 days later).
  • Employees paid on a semi-monthly (twice monthly) basis are usually working the 1st through the 15th and the 16th through the end of the month. You must pay employees by the 26th (for 1st-15th) and by the 10th of the following month (for 16th-last day). There are different due dates for semi-monthly payrolls using different dates so confirm your deadlines if you aren’t using the normal semi-monthly dates.
  • Hourly employees must be paid at least twice per month.
  • Exempt, salaried employees must be paid at least monthly and paid within 7 days of the end of the month.
  • If an hourly employee fails to submit a timecard, you are still legally obligated to pay the employee on time. You base their pay on the employee’s regular schedule and then reconcile it and pay any overtime the next pay period.

If money is tight and you may not have sufficient funds in the bank for payroll, plan ahead and stop employees from working so you can still pay them in full. Lack of funds is not considered a good reason to issue late paychecks. When a paycheck is late, you will be liable for another day’s wages every day after that until the employee receives their pay. That’s an extra day on top of what they might be earning that day while still working for you.

In summary, you can’t move a payday for your convenience and you can’t delay paying employees because you didn’t budget properly. Both are illegal and can result in fines. Post your payday notice and stick with it. You expect employees to show up for work on time; they expect to be paid for that work on time.

Day of Rest

“Can my employees work 10 days in a row when we’re really busy? Do I have to pay overtime or double time when they do?”

Your HR Survival Tip

Terminology reigns when answering your question. Before you can look at an employee’s time, you must determine your company’s official 7-day week… this is legally called a “workweek.” Among other things, your workweek determines when you owe overtime for employees working more than the standard 5-day week. Your workweek doesn’t move around; you make a decision and stick with it.

The courts and California law have stated employees must have off at least one day out of every 7-day workweek… that’s their day of rest. Whenever an employee works ALL 7 days of your workweek, the 7th day will automatically be overtime.

If your workweek is the standard Monday – Sunday, this doesn’t mean every Sunday is automatically overtime pay. This means the employee must work at least a little every single day of the workweek for Sunday to be the 7th day worked in that workweek. If they had any of those days off, they’ve had a day of rest so there isn’t a 7th day worked in that workweek. For example, working one hour Monday through Sunday would mean Sunday’s hour is overtime because it’s the 7th day of that workweek. However, if they worked one hour Tuesday through Sunday, there is no 7th day overtime because they had Monday off.

This gets more interesting when looking at a 2-week period. Your workweek doesn’t change but an employee may work more days in a row without bumping into the 7-day overtime rule. For example, if the employee worked Tuesday through Sunday the first week, they had Monday off so there is no 7th day in that workweek. Then if they continue working Monday through Saturday of the 2nd week, they have Sunday off and no 7th day worked during that workweek. This means they worked a total of 12 days in a row without hitting the 7th-day rule.

You pay overtime if the employee works more than 8 hours in any day, as usual in California. You would also pay overtime if the employee’s regular hours (the first 8 hours in any day) total more than 40 hours for that workweek, which usually means a full-time employee worked 6+ days. But the clock and calendar both start over every Monday if you are using the Monday-Sunday workweek.

Generally, it’s not a good idea to have employees work more than 6 days in a row for two reasons: overtime and hazards. The overtime messes with your profit margin. In addition, you are likely to burn out that employee, and, when employees are tired, productivity drops, and safety becomes an issue. It’s fine if it’s just a short-term need but make sure there aren’t other alternatives if you need the extra help for a longer period of time.

Poor Management Style

“I have a temper and tend to yell at employees when someone doesn’t do their work correctly. My yelling seems to get results. However, Mary, one of my employees, claims we have a hostile work environment. Does she have a case?”

The definition of a hostile work environment is a form of harassment and is frequently misunderstood by employees. They often assume being yelled at is a basis for claiming the office is a hostile work environment. While you may not be providing a great working environment, your yelling may not legally qualify as a hostile work environment.

There are many protected classes, such as gender, marital status, religion, and race, to name just a few. The number of protected classes has grown so now almost everyone belongs to one class or another. Legally, a hostile work environment means you are mistreating specific employees because of their protected class. However, the harassment must also be sufficiently severe or pervasive enough to make the work environment hostile or abusive. The courts consider:

  • The frequency and severity of the conduct;
  • Whether the conduct was physically threatening or humiliating or merely an offensive utterance; and,
  • Whether the conduct unreasonably interferes with the employee’s work performance.

If you yelled at Mary because of her protected class, it could be considered a hostile work environment, unlawful discrimination, and/or harassment. If your yelling is spread evenly amongst all your employees and you yell at everyone when you’re upset, it is unlikely this is a violation of California or federal law. However, your yelling may get results in the short term, but good employees will leave the bad atmosphere and you’ll spend time and money finding new employees.

Even if Mary’s complaint doesn’t fit the legal requirements of harassment, the company must still investigate. She’s made the claim, so the company must respond. Since the complaint is directed toward you, the business owner, you’ll need to bring in someone to do the investigation so you can put the matter to rest.

Avoid this in the future by exploring other, better ways to manage. I’ve never heard an employee say they liked being yelled at, regardless of the reason. Developing a better management style is less likely to create legal issues for you and will result in a better working environment for everyone.

Compensatory (“Comp”) Time Off”

“I have 3 exempt managers who work a lot of hours. I’d like to give them time off to compensate for those extra hours. How do I do this?”

You don’t… at least not in California. California does not allow “comp” time for non-exempt (hourly) or exempt (salaried) employees.

If an employee is non-exempt, you absolutely must pay that employee for all time worked, including overtime. We have both daily and weekly overtime, rather than just the 40 hours per week most states follow.

Exempt employees have different rules. They agreed to certain responsibilities and tasks in exchange for a specific amount of pay. In theory, you don’t care whether that employee can complete all their work in 30 hours or 60 hours each week. You look only at the performance and decide whether or not they are performing as expected and managing all their responsibilities. However, the job should be structured so the work can usually be completed if working 40 hours each week. You are paying for their skills, not for one person doing the work of two.

Generally, exempt employees do not track their time but it’s not illegal to require a timecard. Comp time, however, isn’t the purpose of exempts using timecards. Exempt time tracking is typically used by companies that have their accounting set up for job costing… they want to know how much of their payroll (and other costs) went toward each project. Any other reason needs a valid legal justification.

If you start tracking an exempt employee’s hours and providing comp time for the extra hours they work, California is likely to believe you have converted that employee into a non-exempt employee. You never want to compensate them with time off for each extra hour worked. It’s a legal disaster waiting to be discovered.

That’s not to say you can never provide an extra day off to an exempt employee; just be careful how and when you do it. You don’t want to be discriminatory nor do you want employees to expect it. Therefore, think of the time off as a special bonus for an effort “over and above” during a particularly busy time or for completing a special project that required unusually long hours. Make sure the cause was special before considering the time off. Even then, you can’t reward them hour for hour.

Tell them you really appreciate their extra effort and to take Friday off. Don’t use this for someone who is consistently putting in a lot of hours even when there’s nothing special going on… this could just be a slow worker or a sign you need to adjust the amount of work they have if they can never keep up. This is not a replacement for a higher salary or a substitute for overworking your employees.

Rewarding someone who has put in a special effort is always appreciated by employees. However, think through your plan (or discuss it with us) to make sure it won’t come back to bite you.

When Money is Tight

“I am expecting money from my receivables and an investor. However, right now I’m strapped for cash for payroll. What are my options?”

Whenever money is tight, you need to understand your legal obligations and work to satisfy those before going further. Payroll is one of those obligations.

There are a few ways you can reduce your current payroll cost, which is often one of your largest operating costs. However, you cannot legally withhold or delay paychecks. An employee must have their paycheck within 7 or 10 calendar days after the period worked. The difference between 7 versus 10 is based on which payroll cycle you have (i.e., semi-monthly, weekly, etc.). No matter what your employees might say or agree to; you must pay on time.

You also can’t move the pay date. Even if the new date is within the required time frame, another rule is that you need to keep to the promised schedule. If you’ve said the pay date is the 5th and the 20th, then you must stick with that.

Consider just being honest with employees that the company is going through financial issues and you need to make some immediate changes. Options you could implement are below. When considering these options, either have the choice affect everyone or choose the individuals carefully so the chosen few won’t be viewed as discriminatory.

  • Cut back on schedules — Reduce employees’ working hours temporarily.
  • Cut back on wages — Reduce the amount each employee is paid temporarily. For example, a 10-50% pay cut until you have sufficient funds for payroll. If and when you receive the expected monies, you can opt to catch them up. However, you could keep the pay cut but you need to recognize employees may leave rather than continue to work at reduced wages.
  • Reduce your headcount — A layoff is appropriate if you plan to hire the individuals back. Otherwise, consider a more permanent reduction in force (RIF)… this is better known as downsizing.

The bottom line is, if employees are putting in hours, they must be paid in full and on time. You can’t play with that. The only thing you can do is reduce your payroll to a level that is affordable right now. Don’t wait until you’re facing a payroll with no money. Not only is that bad for morale, but you could end up with fines and penalties that could worsen your financial situation.

Working After Clocking Out

“My employee, Sue, occasionally responds to my emails in the evening. I don’t expect her to respond from home but she does. Now she’s asking to be paid for that time. Do I have to pay her?”

Yes, you do owe her if she’s an hourly employee. You may even owe her overtime if checking her email caused her to work over 8 hours that day. Now that everyone seems to have a smartphone capable of receiving work emails and voice mails, you need to consider your options.

  • Make sure all your supervisors know not to send emails or voice mails to non-exempt (hourly) employees outside of the employee’s scheduled hours. This is often ignored because exempt employees can work varied hours and they don’t want to hamper their workflow.
  • End the ability for certain employees to access emails and voicemails from personal devices. If your employees must use their personal devices during their workday, this won’t be an option for you.
  • Create a policy stating that non-exempt employees are not expected nor allowed to read or respond to emails or voicemails outside of normal work hours. While it won’t be difficult to create the policy, you need to be prepared to uphold your policy by disciplining employees who break it.

Don’t ignore any after-hours work your non-exempt employees might perform. The California Supreme Court has said every minute worked in California is considered paid time, regardless of the employee’s schedule. If employees are doing anything work-related, you’ll need to pay them for that time.

When Per Diem is Not “Per Day”

“I’ve been paying a few of my employees per diem pay but now one of them is asking for overtime pay, too. I’ve told them the per diem rate pays for all time worked that day. Am I wrong?”

A daily pay rate is called a per diem rate and is popular in a few industries. Normally, you would be correct that the per diem rate pays for all the time an employee worked that day. But not in California.

You have to remember that California has something that most other states don’t… a daily overtime calculation. This means when an hourly (non-exempt) employee works more than 8 hours on any day, you will owe them overtime for time worked over 8 hours. Legally, a per diem employee is just an hourly employee and eligible for overtime so your per diem rate can only cover the first 8 hours of work.

Federal law and most other states have only a weekly overtime calculation for time worked over 40 hours. However, California has daily overtime plus weekly overtime. You first calculate any time worked over the “regular” 8 hours in a day, and then you look at any additional time worked past the 40 “regular” hours in a week.

Even if you know per diem pay is the standard for your industry, you are still subject to California’s overtime laws. In California, the only person to benefit from per diem pay is the employee because they get the full daily rate even when they don’t work 8 hours, plus they get overtime if they work over 8 hours.

Unless you’re stuck with using per diem pay, we prefer using an hourly wage because it is less work, less costly, and easier to ensure compliance.

Garnishments and Other Notices

“I received a notice that an employee needs to provide insurance for a dependent. What do I do with this?”

There was a law enacted years ago with the nickname “deadbeat dad law.” The law’s primary use is to help collect child support and/or provide healthcare for dependents. Once an agency knows you’ve hired someone on their list, they send out paperwork requiring you to help them.

A few things to remember:

  • Governmental agencies always mail everything. They don’t call and they don’t email. If it didn’t come in the mail, question what you received.
  • You want to comply with this request as soon as possible because there is a deadline.
  • You absolutely must do what the notice says, even when the employee tries to tell you the situation has changed. The only time you do something else is when you have received (in the mail) an updated notice. Meanwhile, tell the employee you are legally required to do what the notice says.

There are always very specific instructions provided on every type of notice but the package you receive can be overwhelming because they often send you multiple copies. Give one copy to the employee right away. Pull one copy for yourself so you can follow the instructions. You will have to complete parts of the document and return it to the agency. If you’re really stumped, the notice will include a phone number and name of the person handling this case and you can call them for help in complying.

If you received a garnishment, it will tell you how to calculate the amount to deduct from the employee’s paycheck and where to send it. This must be done every pay period until the total amount they cite has been paid. In addition to being used to collect back child support, garnishments are also used by the IRS to collect back taxes. Talk with your payroll provider to find out if they will send the money to the agency or if you need to do it.

If you received a notice regarding a child’s healthcare, it’s probably a National Medical Support Notice (NMSN). This notice also requires you to provide information about your insurance plan. If your employee did not enroll in your insurance, the NMSN will require you to enroll both your employee and their dependent.

Most notices can be a bit confusing and scary at first but you’ll do fine if you just stop and read the document. Unlike so much other paperwork we receive from governmental agencies, they actually try to make it fairly easy to comply.

Don’t Miss the Opportunity

“I have an employee, Sam, who is a constant problem. Today while speaking with him, he became frustrated with the conversation and said he might as well quit. Later I found myself wishing he had. What should I have done?”

As an owner or manager, you need to be alert to things going on with your employees. This situation was one of those perfect missed moments.

If you have an employee who hasn’t done well, you need to work with them to improve their performance. When the employee isn’t particularly motivated to want to improve, he can become frustrated with your efforts. I have heard Sam’s comment before. The trick is grabbing that opportunity.

When an employee says something like “Well, I might as well quit,” your response could be “Okay, I’ll accept your resignation. Let’s talk about the timing.” It’s likely the employee wasn’t truly serious and was hoping you’d realize they are a valuable asset. It’s a surprise to them when you accept that off-the-cuff resignation.

The other side of this situation is when an employee misinterprets something you’ve said and now believes they have been terminated. Again, you need to react fairly quickly unless that was really what you intended to say.

If an employee knows they messed up, they could be assuming they’ll be fired. Be very clear that wasn’t your intention… unless it was. The biggest reason you need to pay attention to this is because, in California, you better have that final paycheck ready if termination is your intent or you’ll be open to fines and penalties.

Ideally, of course, you manage your employees in such a way that neither of these situations would ever occur. However, it pays to keep your ears open for unexpected reactions and keep your responses timely and appropriate for the situation.