4 payroll recordkeeping requirements employers must know
When it comes to payroll, there are a multitude of responsibilities for companies to keep in mind. One of the most important is recordkeeping, especially those required by the federal government. The Fair Labor and Standards Act sets employment standards and orders businesses to maintain records for all workers who are not exempt from minimum wage and overtime pay, among other rules.
Here’s a breakdown of the top four documentation practices businesses should follow:
1. Maintain log of current personal data
There are certain elements of people’s records that must be updated over time to keep data accurate. Aspects including address, full name, social security number, sex and occupation are crucial for ensuring the employee roster is current and no terminated employees are still registered in a company’s payroll system. In addition, these materials must be maintained in the case of government outreach or confirmation of proper payroll procedures and policies.
“The DOL’s overtime threshold is subject to change within the next year.”
2. Document employee’s daily and weekly work hours
Organizations must keep track of the number of hours employees work on a daily or weekly basis. This record is directly tied to the definition for overtime and improper maintenance of documentation of this element could result in companies paying workers more or less money than they’re due. According to the Department of Labor, a person who is exempt from receiving overtime must make at least $455 a week or $23,660 annually. Anyone under that threshold would be eligible to receive additional pay. Although this is the current standard, the DOL is looking to change that exemption limit to $970 per week or $50,440 in the next year or so.
3. Keep track of regular hourly pay rate
Since the FLSA creates the standards for things like the minimum wage, it’s critical for employers to record the hourly rate they’re paying workers for payroll purposes. This requirement varies by state and is subject to change, usually on a yearly basis. Businesses are obligated to compensate people with the higher rate, whether that’s the state-mandated or federal government’s amount. By keeping track of their hourly rate of pay, companies can ensure they remain compliant with this regulation and pay their employees appropriately.
4. Retain records for three years
Employers shouldn’t get rid of their worker documentation after it’s served its purpose. Instead, the FLSA requires companies to retain their payroll records, collective bargaining agreements and sales and purchase reports for three years. Furthermore, businesses must keep all documentation that explains the basis for wage compensation for two years. All of these elements must be available for inspection if deemed necessary by state and federal governments.
It’s important for companies to understand their obligations regarding payroll. While following overtime and minimum wage laws is mandatory, it’s also crucial for employers to maintain their worker records for an extended period of time. This documentation will ensure all business practices are current and people are compensated appropriately.