Pay on Time or Pay More

“I’m low on money and would prefer to pay my employees a week late. They say they’re okay with it.”

Paying late is not a legal option. If you don’t think you’ll be able to pay employees in full AND on time, have them stop working immediately. California is very clear and very protective about employees being paid in full and at exactly the same time every pay period.

Here are a few of the rules:

  • The employee must receive their pay within 7 days of the time worked. For example, if you are paying every 2 weeks, you only have 7 calendar days after that 2-week period ends to get a check AND wage statement (pay stub) into their hands.
  • If you are using semi-monthly pay periods (twice per month) of 1-15 and 16-the last day of the month, the latest you can pay is the 26th and 10th, respectively. If your semi-monthly pay periods are on another schedule, such as 10-26 and 27-9, you must pay within 7 calendar days.
  • You are required to post your payday and the rules about it. If the payday falls on a Saturday, Sunday, or Federal holiday, you may pay the next business day. However, you need to state what your policy is… you can’t fluctuate from month to month.
  • If an employee has failed to turn in a timecard, you must pay for the scheduled time and then reconcile it later.
  • Overtime from one pay period may be paid in the next pay period, assuming you were unaware they worked it.

Penalties for a late paycheck can be very costly. The first violation is $100 per employee in penalties. The second and subsequent violations will cost you $200 per employee, plus 25% of the wages due. Plan ahead so you don’t end up with a claim before the Labor Commissioner’s Office.

Time to Plan the Holidays

“I’m never sure on which holidays I should close or pay employees if they’re off. Are there rules?”

Holidays are a true benefit and one you are not required to provide. No law requires you to pay employees for a holiday, even if you close that day. If an employee works on a holiday, they are only legally entitled to their usual hourly rate for time worked. The only real requirement is to ensure your decision is not discriminatory.

Depending on your industry and business, it may be easier to close on some holidays than others. Many restaurants may only close on Thanksgiving and Christmas; others may stay open. Consider whether employees may have difficulty being productive if nearly every other business they must contact is closed. The great news is you get to decide for your own business.

Late fall each year is the best time to think through the next year and which, if any, holidays you will close… and whether they will be a paid day off and for whom. It’s okay to have distinct groups with different eligibility, such as office staff getting paid holidays vs. field employees getting an unpaid day off, etc. But, with Thanksgiving on the horizon and more holidays coming up, look at what your policy says about eligibility so new employees will know if they are eligible.

Consider allowing employees to celebrate their own religious holidays. You can require they use personal time, unpaid time, or possibly swap for another holiday (if you need coverage during holidays). If an employee requests a day off for the religious day(s) of their choice, try to accommodate them if at all possible.

Add your policy to your Employee Handbook, plus post a list of coming holidays as a reminder for employees. It’s best to have a full year’s holidays listed so employees can plan their personal time off better. Review your list every year and determine if you’re going to allow the same or different holidays the next year.

Employee’s Track Record

“I have a couple of employees who continue to occasionally disregard my rules. When it happens, I talk with them and they work harder for a while, then slip back into bad habits. What should I be doing to avoid this?”

Your HR Survival Tip

As you’ve already noticed, just having the same conversation time and time again doesn’t work. They aren’t changing because they know the worst you’ll do is have yet another conversation with them. If you aren’t documenting each conversation (and giving them a copy), you aren’t taking it any more seriously than they are.

Ideally, the personnel file is a record of each employee’s work life. No, this isn’t a minute-by-minute replay, but it should show the highlights. For example:

  • 2022-11-12 – Sam was 30 minutes late to work and said traffic was bad. I told him he should leave earlier so the traffic doesn’t affect his arrival time.
  • 2022-12-19 – Sam volunteered to work late to help me finish the Acme project so I met the client’s deadline.
  • 2023-01-07 – Sam was 60 minutes late to work and said he forgot to set his alarm. I warned him this wasn’t an acceptable excuse.
  • 2023-01-29 – Sam left 15 minutes early without permission. The next day he told me he was done with his work and thought it would be okay. I told him he must always talk with me first.
  • 2023-03-02 – Sam was 45 minutes late to work and told me he had a flat tire. However, another employee commented that Sam told him he was hungover. I met with Sam later that day and asked him and he admitted to the hangover. I warned him the lie and the reason was unacceptable.
  • 2023-03-17 – Sam was helping Joe and Betty with their work because he finished his project early. I complimented him on his teamwork.

As you can see, these notes are very short but there are a few key points. (1) Full dates (YYYY-MM-DD) so they are easily organized; (2) keep it short unless there is a full-blown event you need to explain; (3) be specific so anyone reading it can understand it, and (4) the outcome: what did you do about it?

When you write documentation like this, we can see Sam has a pattern of tardiness with weak excuses. If you want to officially put him on notice, you can cite the actual days he was late and why. That’s very powerful. On the other hand, if you’re doing an evaluation on Sam, you have the information needed to give examples of the area(s) he needs to work on but also specifically when he went above and beyond your expectations.

Your notes shouldn’t be all positive or all negative. Any disciplinary action or pat on the back will carry much more weight if you can be very specific with dates and events.

Don’t make this cumbersome. Figure out the best method to make notes that easily works for you and can be kept confidential. If you’re not sure your notes are usable, pretend an attorney is reading them… can s/he understand the notes without asking you questions?

Perking Up

“I have employees who have been with me for quite a while and I’d like to give them raises… but can’t afford a higher payroll. What are my options?”

Your HR Survival Tip

It’s been years since employees realized a noticeable increase in wages. Unfortunately, those 1-3% increases are just as likely to shift your employees to a higher tax bracket so they actually see less on their paycheck. As companies have struggled to survive, employees are also struggling to live on static wages.

Giving an employee a raise has a rippling financial effect. Your payroll taxes and your workers’ compensation insurance premium will go up because they are based on overall payroll. It’s also hard to reduce those wages if times are hard again… you can do it legally but it’s hard to retain employees when a pay cut is necessary.

Now is the time to think of what other options you have. “Perks” have always been a standard in management positions and it’s time to consider what perks you might implement for the rest of your staff. This is becoming a popular method for rewarding employees when raising wages isn’t an option. Here are a few things we’ve heard about:

  • If you don’t offer any paid vacation time, develop a bonus program that rewards employees with paid days off instead of cash.
  • Give out an occasional discretionary bonus. Even if it were equal to what they might earn with an increase for the year, it still costs you less overall.
  • Cover a higher percentage of health insurance premiums or add an additional insurance.
  • Pay for a gym membership.
  • Provide commuting subsidies.
  • Create a monthly bonus plan where the “bonus” is their choice from a group of items you have available. These are typically items for personal use and could be a $25 gift card to a local restaurant or even an electric toothbrush.
  • Provide tuition reimbursement if your company encourages continued education.
  • Give out $25-100 gift cards for outstanding performance.
  • Provide a turkey or ham and a $300 grocery store card just before the holidays.
  • Add another holiday just for this year.
  • Arrange for a dry cleaner to come to your facility to pick up and drop off cleaning.

Deciding which perks to offer is a matter of testing to see what will work best and be most appreciated by your employees. Just because you love a particular perk doesn’t mean they will. Make sure this is a positive experience for them.

Talk Gets Old

“I have an employee, Joe, who is 66. Although he hasn’t talked about retiring, I’d like to start planning to find and train his replacement so we’ll be ready when he retires. How do I initiate that conversation?”

Your HR Survival Tip

You don’t initiate that conversation. Period.

Most discussions about retirement can very easily backfire on you. Initiating that discussion may look like you are pushing the older employee out. Especially if you even hint at a possibly younger replacement.

A previous court decision resulted in a “workable” rule that basically said if the age difference between the employee and their replacement is less than 10 years, there may not be a case for age discrimination. However, that changes if additional evidence shows the employer considered the employee’s age to be significant. It may also make a difference if the replacement is under 40 and the employee is over 40.

You make an employee’s age “significant” if you, or your employees, make comments such as “the old guy,” “let someone younger do that,” “your ideas are obsolete,” “you’re slow,” “your knowledge is ancient,” or “old fuddy-duddy.” Allowing phrases like these to be used in the workplace, even in good humor, can help make a legal case for an older employee. Make sure everyone is treated, and talked about, with respect.

If you want to provide retirement information, provide it as part of an all-employee meeting so no one is singled out. Make sure useful information is provided for employees of all ages. This can be a great topic even if you don’t have employees near retirement age.

You are currently concerned about someone at retirement age, but employees come and go at any age. A viable option is to consider cross-training several employees (not just Joe). Retirement is only one reason an employee leaves a company. Don’t leave yourself open to losing company knowledge or worrying about losing a specific person. Back up what (and who) is important to your company.

Describe That Job

“A few of my employees have asked about job descriptions. I don’t have anything written but do walk them through their job duties when they start working for me. Why would I want or need anything in writing?”

Your HR Survival Tip

While job descriptions are not legally required, they are highly recommended. I’m not talking about those 6-12 bullets you’re tempted to throw on a piece of paper. A well-written job description can be very useful to you by:

  • Making sure all employees are aware of the specific tasks associated with their job and accountable for the successful performance of those tasks;
  • Having the necessary information and facts available to recruit and/or advertise a position;
  • Determining the exempt (salaried) or non-exempt (hourly) status of the job;
  • Serving as a guide for onboarding, training, monitoring, evaluating job performance, and setting goals;
  • Helping when you have a workers’ compensation claim by ensuring the doctor understands what the physical aspects of the job are; and
  • Establishing the “essential” job functions to facilitate compliance with the Americans with Disabilities Act (ADA) and adding protection for your company.

Your job descriptions should begin with a 2-3 sentence summary of the job’s content, purpose, and scope. Think of this as your employee’s 30-second description of their job.

This is followed by 5-8 duties and responsibilities in order of priority, the performance of which is critical to job success or failure. Provide as much specific information as possible, i.e., how, what, with and for whom, where, and specific examples of frequency or average number completed within a specific time frame. I like to see these items written as short paragraphs but with specific detail, such as “create correspondence using Microsoft Office programs.” Detail any type of machines, materials, tools, computers, and computer operations used in performing the job functions.

The “Requirements” must be the minimum levels of knowledge, skill, and ability you’ll accept. You don’t want to tell someone they aren’t qualified and then hire someone else who doesn’t meet those requirements. Be specific, such as “At least 3 years of experience in Human Resources with increasing responsibilities.” If there are things you’d like to find in an applicant but can’t justify making it a requirement, add it to the “Desired Job Skills” category.

“Working Conditions” include specifics about the work environment that might be significant to the performance of the job or to job satisfaction. For example, it may be important to note the noise level, amount of travel, limited space (like working in a cubicle), special equipment or clothing necessary, and safety and health factors.

Once you have a good job description, make sure you and your employees are on the same page with what they are actually doing. This is a living document, which means it doesn’t stay any more stagnant than your business does. Update those descriptions every year to ensure they are current and useful.

While it can be a little time-consuming to first create a job description, it’s worthwhile if you really use it. There are a lot of templates available online to get you started or give you ideas.

We Know Where You Are

“I have employees in the field who have company cell phones with GPS tracking. This is so great because I can log in anytime and see where they are and how long they’ve been there. However, one of my employees, Joe has removed the GPS tracking device. Can I fire him for that?”

Your HR Survival Tip

Tracking employee movement through GPS is a great tool but it can also be the topic of lawsuits lately. While you can fire Joe for altering company property, you should look at the bigger picture first.

In California, particularly, more and more privacy laws are being enacted and you may be viewed as stomping on Joe’s privacy… especially during his non-working hours. We’ve seen how the GPS programs can show real-time movements of the employee, the route, and the length of time at each stop. Does your particular software have a way to shut down when Joe stops working for the day? If you can see what Joe is doing during his non-working hours, you may have legal issues.

Review your policies about leaving company phones on after hours and general use of that phone, plus review the GPS application’s capabilities. If shutting the GPS off during non-working hours is possible or your policy allows employees to turn the phone off when not working, then your policy can easily indicate disciplinary action for altering company equipment. You may have fewer options otherwise.

Tracking employee movement during working hours seems to be in our future. Now is the time to develop a policy that fits your business needs while being respectful of your employee’s privacy.

Exempt Positions

“Some of my employees feel they should be exempt but I’m not sure they qualify.”

Your HR Survival Tip

Employees often feel being exempt (salaried) is a sign they are in an important position. And, as far as it goes, exempt positions are important and have a higher level of responsibility. However, only the employer can designate a position as exempt and only after ensuring the salary level and the duties of the job meet federal and state requirements. Legally, the employee has nothing to say about it… no matter what they want.

The trickiest part of determining if a position is qualified to be exempt is the duties test because it can be very subjective. The tipping point is when you look at how their time is spent… at least 50% must be spent making decisions rather than doing the work. Also, look at the duties and responsibilities rather than routine tasks. Here are a few examples where we have seen companies make mistakes:

  • Administrative Assistant – Typically this will be a non-exempt (hourly) position. The exempt level must spend less than 50% of the time doing office/clerical work. Instead, they are part of a large organization, and their time is spent on duties involving managing the owner or executive’s schedule, acting for them when dealing with third parties, researching and handling special projects, arranging Board or shareholder meetings, etc. Much less time is spent on clerical tasks.
  • Project Coordinator — Typically this will be a non-exempt position because most of their day is spent coordinating with others, chasing project deadlines, and other administrative work. They aren’t developing or analyzing the projects themselves.
  • Supervisor — Often a non-exempt position because they don’t typically have the level of responsibility of a manager. They are usually spending at least 50% of their time doing the same work as those they supervise.

As minimum wages increase, so do the minimum salaries because they are calculated based on state minimum wage. If you are trying to justify a $67,000 minimum salary, it’s very likely the position should actually be non-exempt. A true exempt-level position often pays at least 20% more. Stop trying to squeeze employees into exempt positions because you will regret it down the road.

Reclassify the Exempt Employee

“I have an exempt (salaried) employee I’d like to make hourly instead. How do I do that?”

Your HR Survival Tip

When minimum wages increase, the minimum salary you must pay increases. At some point that salary may start to feel too high for a particular position. You may reclassify an exempt (salaried) employee to a non-exempt (hourly) employee but you want to think it through to avoid problems. You don’t want to just change a position to hourly without being aware of the potential legal issues.

The first thing is to confirm the legality of the employee’s current classification. In other words, was this person correctly classified as exempt? A proper classification of exempt means the position meets all the requirements listed in one of the Federal exemptions, including both the salary and duties tests. A good reminder for everyone is that even a high salary doesn’t automatically mean a position will qualify as exempt. The minimum salary requirement is easy because you are either paying sufficiently or not (2 X state minimum salary = the absolute minimum salary you can pay, regardless of how few hours they work). The duties test is more challenging because there is some subjectivity involved so be conservative to be safe.

If the employee was not correctly classified as exempt, you have some issues and need to make this transition very carefully. The problems include unpaid overtime, missed meal breaks, etc., that they would have received as an hourly employee. If this is where you are, you will want to talk with us or an employment law attorney about your risks and options.

If the employee was correctly classified as exempt, the transition to non-exempt is fairly simple. Even then, you’ll want to have a solid explanation of why you are reclassifying their position because they will ask. An explanation might be that California’s annual increases are causing the minimum salary to go higher than you can pay for the position, or the amount of time off the employee has been taking will work better in an hourly role, or the position is actually changing and will no longer qualify as exempt.

The transition itself is very simple. Create a memo, letter, or form indicating the effective date and hourly rate of pay. If this transition changes any benefits or the title, include that. Make sure the employee knows the new rules regarding tracking time, meal and rest breaks, and other non-exempt details. Although the total pay may not change, it’s still a good idea to give the employee a week or two notice of the change.

Keep in mind some employees feel the exempt classification is an acknowledgment of their value and level of position so they may feel they were demoted. That’s not the case so make sure they know you still value them.

Have a POP

“I just started offering health insurance to my employees. Now my broker is trying to sell me something called a POP. Do I need it?”

Your HR Survival Tip

Congratulations on providing health insurance for your employees. We know that’s a big financial hit but it does make your company better able to recruit and retain employees.

Yes, you want a POP. This is a “Premium-Only Plan” that allows you to deduct an employee’s share of the premium on a pre-tax basis. Without having a POP in place, you must deduct from the after-tax, net pay. Since a POP is typically only about $150 per year, it’s a very low amount to spend to ensure your employees save money when they elect your insurance.

A POP is one part of what the IRS allows under Section 125 in the Internal Revenue Code. The other parts are usually just called Section 125 plans or Flexible Spending Accounts (FSA). These allow employees to set money aside on a pre-tax basis for healthcare expenses that may not be covered by insurance, such as over-the-counter medications, eyeglasses, contact lenses, etc. Another portion can be used to pay for childcare with pre-tax monies.

While employees may like the sound of implementing an FSA, do so very carefully and after you fully understand it. Since the IRS rules this, there are pros and cons for your company and for your employees with the healthcare FSA. For example:

Sam wants to set aside $1,500 so you divide that between all his paychecks for the plan year. Sam could use the whole $1,500 in January and the company is covering that… and waiting to be paid back throughout the year by Sam’s deductions. However, if Sam quits in March, the company has no way to recover the full amount used by Sam. On the other hand, if Sam didn’t have the medical needs he thought he would have and only had $200 in eligible expenses to submit, Sam would lose the excess he set aside and it would revert to the company. The IRS feels the healthcare FSA balances out because sometimes the company is the loser and sometimes it’s the employee. However, if the plan is explained to employees carefully, they are less likely to lose much money. The IRS sets the maximum allowed for use in this plan but the company can set a lower maximum to lessen the risk.

The dependent care FSA is much simpler. The employee cannot submit a receipt for more than they have already put into the plan. Therefore, the company doesn’t provide any advance. If the employee understands the plan and knows their expected expenses, this works great for them, too.

While the FSA plans can be very good, you want to fully understand the risks and limit your exposure. Buy the POP because you and your employees will save on taxes. Don’t assume you have one just because you are taking those deductions pre-tax or you may end up paying back taxes. Ask your broker to be sure.