Regular Vs. Base Pay Rate

“I’m confused. When talking about an employee’s regular pay, I’m assuming it’s the same as their base pay. However, now I’m hearing something different. Are these the same?”

Your HR Survival Tip

An employee’s base rate may be the same as their regular rate. However, many times, the regular rate is actually higher than the base rate because the regular rate is based on a calculation and includes more things.

The base pay is the hourly rate you pay the employee and it’s no more complicated than that.

The regular rate, as mentioned, is a calculation based on money paid to the employee for more than just hours worked. It includes those hourly earnings, non-exempt salary, commissions, production bonuses, piece-rate earnings, and even the value of meals and lodging. Also included is that stipend you might pay the employee toward a personal insurance policy instead of providing company health insurance.

What does not count toward that regular rate are gifts, holiday pay, vacation pay, sick pay, expense reimbursements, discretionary bonuses, profit-sharing, overtime pay, and ERISA-qualified retirement plan contributions.

Why does this matter? Because when an hourly employee works overtime or uses sick time, you can’t just pay them based on their base pay…it’s paid based on their regular pay. Yes, this means you probably owe the employee a bit more after you do the math.

If the employee only gets an hourly wage and nothing else, then the base and regular rates are the same. But if the employee receives any of those compensable items mentioned above, you need to do the calculation.

A simple version of this calculation is taking all compensation provided to the employee for the time period (your pay period, for example) and dividing that number by the total number of hours worked that same period. The amount you get from that calculation is the basis for any overtime and sick pay. So if the employee’s base rate is $15/hour but the regular rate ends up as $16.59, then you might owe an overtime premium of $8.295 instead of $7.50. The overtime premium is the “half” of time and one half. You would be paying sick time at $16.59, per the city of San Diego’s sick leave law.

The calculation for the regular rate can get more complicated than described here if there are multiple pay rates, prevailing wage, etc. If in doubt, consult us or an employment law attorney to ensure you are paying employees correctly.

Risky Role Models

“I like to joke around and hug my employees occasionally. Someone has told me I need to stop most of it but I really want employees to have a great place to work. Is fun no longer allowed at work?”

Your HR Survival Tip

Nearly every employee would like to work at a company where it’s a great atmosphere and the boss is approachable. But you need to understand what that means to ensure you aren’t sending the wrong message. The one message you need to remember is “if I do it, it’s okay for everyone else to do it.”

Often someone in management may be able to pull off a behavior that goes badly awry when a subordinate tries it. Perhaps they don’t understand the legal or company rules as well as you. Or maybe they just don’t understand there are differences between what you’ve done or said versus what they do or say. Let’s look at a few behaviors we’ve seen from management:

Joking Around – When kidding with employees, you need to be sure you aren’t being offensive or that someone will think it’s offensive to someone somewhere. Very few jokes can pass the test as appropriate at work. And can you really explain the difference to an employee?

Hugging, Kissing, Etc. – Given that most people in management won’t even meet alone with an employee for fear of a harassment claim, do you really think everyone is okay with your hugging or whatever other form of touching you are doing? Rarely will you enter a room where every person loves to be that friendly. In addition, how do you discipline an employee for harassment when you’ve been the role model? Do you know what the difference is between you hugging an employee and another employee doing it? The difference is the courts will come down harder on you than that employee because you’re in management.

Ethical Situations – If you’re found fudging on your books or even your expense report, you’ve just shown all your employees your ethical line. If your accounting clerk now borrows (and repays) petty cash, how do you tell him that’s wrong when he processes your “exaggerated” expense reports?

Bottom Line – Proper or appropriate behaviors in your company roll down from the top. The owner, in particular, and all senior management have the responsibility of providing the role model for those behaviors. If you do it, others will assume it’s okay for them to do it so look carefully at the role model you’re demonstrating. If you say one thing but do another, it’s a mixed message and employees will follow the piece they prefer.

Even the courts have shown us companies take a harder hit when management exhibited behaviors that led to lower-level personnel doing something illegal. The courts also believe you should know what’s happening in your company so you need to know how employees perceive those role models. Pay attention to the messages you are sending every day by your behavior and when interacting with employees. You may not be shouting “I’m a potential harasser,” but you may be giving the impression that certain harassing behaviors are okay.

New 2020 W-4 Form

“I’ve heard there is a new W-4 form but want to know how to explain it to my employees. Can you help?” 

Your HR Survival Tip

It’s very important to remember the 2020 W-4 must be used after 1/1/2020. You do not need current employees to use it unless they want to make a change in their tax deductions. However, all employees hired after 1/1/2020 must use this new form.

Simply, the employee must complete Step 1 and Step 5. The other steps are only completed if the employee meets certain criteria.

  • Step 1:  The employee adds their personal information. If you don’t get a W-4 from the employee by the time you need to process payroll, you default to “single” in (c).
  • Step 2:  If the employee has multiple jobs or has a spouse with a job, they’ll need to complete this step. If the employee wants to maintain their financial privacy or asks for help from you, the safest thing is to direct them to the online calculator in (a) (https://www.irs.gov/individuals/tax-withholding-estimator). Using the online calculator will also provide the employee with the most accurate assessment of their situation and give them the information they need to complete the form.
  • Step 3:  The employee enters the information requested about dependents.
  • Step 4:  If the employee receives income from somewhere other than jobs, knows they won’t be claiming the standard deduction when they file their annual taxes, or want to have more taxes deducted from each check, they enter that information here.
  • Step 5:  This is the final step and if the employee doesn’t complete this section, the whole form is invalid. If this happens, it’s as if you didn’t get a W-4 from them.

Please keep in mind that you can explain to the employee what each box requires, but don’t do their math or offer suggestions. That’s a liability risk you don’t want.

Check the payroll processor you’re using and make sure they have updated their software to handle the new W-4. Their old software doesn’t have the same W-4 boxes to enter information so you’ll be unable to add a new employee into old software. Check out your payroll software before you actually need it.

Promises to Be Paid

“I gave a large advance to an employee and we started deducting money from his paychecks to pay it back. However, he just resigned and still owes me $750. What are my options for getting the rest of my money?”

Your HR Survival Tip

Whenever a company “lends” money or provides equipment to an employee, you will always take the chance you won’t get it back. California does not allow you to deduct anything from that final paycheck. Yes, even if they have your phone or laptop or an outstanding loan, the value cannot be deducted without the employee’s express permission (in writing, to be safe).

At a minimum, at the time the money was advanced or loaned, you should have put into writing a repayment schedule and agreement for the employee to sign. You don’t want to start deducting money from an employee’s paycheck for any reason without written authorization (aka proof that it’s a legitimate deduction) from the employee.

Once the employee terminates, all bets are off. Since you can’t deduct the remainder owed from the final paycheck, you either have to hope the employee will send you the money or take them to small claims court. However, most companies don’t have the time or patience to use small claims court so the remainder is usually written off.

How can you avoid the loss? Instead of just setting up a repayment agreement, formalize the advance/loan with a promissory note. This should be a template from an attorney to ensure it has language allowing you to take legal action if repayment stops or even fails to begin. A legal promissory note gives you more options for collecting monies owed you, including sending it out to a debt collector.

Of course, you avoid this problem if you only advance what can (and will) be repaid with the next paycheck. The employee could still terminate before the end of the pay period, but that’s less likely than over a longer period of time. Have your attorney create a template you can use if you tend to lend.

Prepare for 2020

We hope you have had a prosperous year and are looking forward to the final holidays this year. Now is also the time to plan for the employment law changes in 2020:

  • CA Minimum Wage — Calfornia has, as usual, an increase of $1/hour to the minimum wage on 1/1/2020. This means companies with 26+ employees increase to $13/hour and those with less than 25 employees increase to $12/hour. This is only the state wage so, if you are in an area with a local law, you need to check what that new rate may be.
  • San Diego Minimum Wage — The City of San Diego is one of those areas with a local law. If you have employees working within San Diego city limits, you’ll need to pay $13/hour regardless of the size of your company…while those employees are working within San Diego.
  • Minimum Salary — Whenever the state minimum wage increases, so does the minimum salary. So on 1/1/2020, your exempt (salaried) employees may need a raise. Companies with 26+ employees must pay at least $54,080/year and those with less than 25 employees increase to at least $49,920/year. Keep in mind this is the absolute minimum you can pay an exempt salaried employee…regardless of how few hours they may work. Even a part-time salaried employee must make this same amount at a minimum.
  • Computer Software Professionals Salary — Only California has a special exempt salaried rate for computer software professionals. This amount will be increased to $96,968.33/year. The exemption is very specific so don’t use this exemption unless you are sure your employee meets the qualifications. All other computer professionals must be paid hourly.
  • Sexual Harassment Prevention Training Deadline — Although we received a reprieve on the deadline for sexual harassment prevention training, we are now moving toward the new deadline. If your company has 5+ employees anywhere (counting owners), then ALL California employees must be trained before 12/31/2020. Supervisory employees have a mandatory 2-hour training and non-supervisory employees have a 1-hour training. After the initial training, they must be retrained every 2 years. See our online training at www.Outpost.HRjungle.com!
  • Independent Contractors — The new laws regarding independent contractors are already in effect but now is the time to reclassify those workers, if you haven’t already. The very simplest explanation is that anyone who has contact with your customers MUST be an employee. There are many more aspects to this so please check with us or your employment law attorney to ensure you are compliant going into 2020.
  • New W4 Form — There is a new Federal W4 form you must start using on 1/1/2020. While this must be used for all new hires, you are not required to have current employees complete it. The new method of employee taxation will be based on total family earnings rather than just the number of exemptions they claim. The new W4 is intended to make it easier for employees to have the appropriate amount of taxes deducted. Let us know if you need the new form.

There were more laws enacted but those listed above are the ones most likely to affect you the most on January 1st. We want to help you be compliant so please ask us questions about how any new laws affect your company.

Why You Do What You Do

“I now have about 30 employees and have heard about employee engagement but I don’t really know what that means or why it’s important.”

Your HR Survival Tip

Employee engagement, in simplistic terms, means employees are involved in your company rather than just having a job. If the employee is just coming to a job, they can easily replace that job with a different one. However, if they are engaged with your company, they feel needed and important and that emotional connection often results in much better retention and happier employees.

Involving employees in the business isn’t that hard to do. People love to give their opinions and many just need to be asked. Management often gets so wrapped up in the big picture, they don’t really know how the front line is doing. If you think about it, that front line may not have a management title but they are often the ones with great ideas that could save you money or increase production.

If we walked into your company and started talking with employees, how would they answer these questions?

  • Why is what you are doing important to this company?
  • Do you have ideas of how your work could be done more easily or better?
  • Has anyone ever asked for your opinion about the work?
  • Do you know why your job is done exactly as you do it?
  • Can you tell me what the company values?
  • How do you describe to others what this company does?

The employees’ answers will give you a pretty good idea of how engaged employees’ are and how they feel about their jobs. One of the most important things you can do is to make sure every employee understands why their job is valuable to your company. Even low-level work is important and they need to know that. Based on the answers you get to these questions, you’ll know where you need to put some effort in creating engagement with your employees.

Questionable Posts

“Sarah, my employee, has been posting on social media a lot of pictures of herself partying and drinking. She has been moving up in the company but I think these posts could eventually hurt her career. What can I do?”

Your HR Survival Tip

Legally, there’s nothing you can do about the choices employees make when posting on social media. People of all ages now seem to post everything about their life, without regard to privacy or what others may think. Once something is posted, it truly is “out there” forever. People don’t always think about that when posting.

You can counsel Sarah and explain she might want to give some thought to the message she’s sending with her choice of posts and who is seeing them. Although we all have personal lives, every detail doesn’t need to be made public. In some cases, those posts may actually alter what people think of her and that could ultimately damage her career.

Strangely enough, a lot of people feel a person with a lot of responsibility at work must be responsible at all times. For example, people may not want to see their banker getting sloppy and having fun at a party. They only want to know this person is someone they can trust.

If you have employees connecting with clients, have them stop using their personal accounts. Instead, create a company page where they can connect and you can control what gets posted. Another option you have is to coach your employees to maintain a separate list for business contacts, when possible, so they can better control what is viewed by those contacts.

As politicians have found, it can be very awkward to have an old post suddenly pop up as a news item. Many companies are now scouring social media to gain more insight into applicants. Regardless of whether they should do that or not, employees need to be aware of the potential long-term effects of publishing every aspect of their lives.

Are You Insured?

“I don’t provide insurance for my employees but I recently heard everyone is now required to be insured. What is that about and how does it affect me?”

Your HR Survival Tip

When the Affordable Care Act (ACA or ObamaCare) was enacted years ago, the mandate was for companies of 50 or more full-time employees (or full-time equivalents) to provide health insurance for employees. If you were required to provide insurance and didn’t, you are subject to a tax penalty. California has now enacted its own version of this for individuals through SB78 and individuals must have coverage by 1/1/2020.

This law created an individual mandate requiring all Californians to have health insurance coverage. Everyone is affected…your employee, their spouse or domestic partner, and their dependents. If any individual is not covered, they will be subject to penalties when filing their state income tax return in 2021. Right now it appears the penalty starts at $695 per adult and half of that per child, but it does depend on your total family income. The penalty can be avoided if they have proof of coverage for every month going forward.

There are exceptions if the premium for the individual or family is over a certain percentage of income. The premium would need to be more than 8.4% of the household income. There are other exemptions but check them out carefully if you plan to count on one of them. Options for no-and low-cost coverage are also available through California’s MediCal program.

If you offer health insurance but have employees (or their families) who are not covered, they must obtain coverage. Individuals can use the California Exchange (CoveredCA.com) and may be eligible for financial assistance. The other option is to go through an insurance broker…brokers do not cost you anything and they may be able to find you a better plan for less money. Plus, you have someone to contact with questions.

This new law does not affect companies but may affect your employees. The deadline to obtain coverage is January 1st so please spread the word to your employees and make sure they understand the consequences of doing nothing. Insurance coverage is no longer an option, it is now a law. If you need an introduction to a broker who works with individuals (instead of companies), let us know!

Paying Per Something

“I have a dental practice and just got hit with a claim for not paying an employee correctly. However, she’s per diem and I pay her for each day worked. What did I do wrong?”

Your HR Survival Tip

There are several ways the “per” something payment methods can go wrong for you. While most of these work just fine in other states, never forget you are in California and nothing is the same here.

Below are some examples of what we see go wrong and why:

  • Per Diem — Per diem means a daily rate. This is quite common in the healthcare field. You might not be aware that many dental hygienists are paid per diem because they might only work 1-2 days a week at your dentist’s office and another 2-3 days at other offices. However, in California, you must remember we pay overtime for any time worked over 8 hours and that includes per diem workers. So if your per diem worker doesn’t stop work after 8 hours, you’ll owe the per diem rate plus overtime.
  • Per Week — This isn’t an official method of paying but you might be using it without knowing it’s wrong. Let’s say you have hourly employees who have agreed to work for a certain amount of money each week. You’ve agreed the workweek includes one day with a little overtime and a couple of shorter days. The amount of pay is intended to cover 40 hours of regular time and 2 hours of overtime, even though the employee may not actually work a full 40-hour week due to the short days. Sounds fair and keeps payroll easy, right? The problem is, again, California. You must pay overtime as a separate line item in payroll as proof of payment. The Labor Commissioner would say the weekly amount is only paying for regular time and can’t include overtime…and you still owe for that overtime.
  • Per Pay Period — This happens too often. You have an hourly employee who works no overtime so you both agree to just pay him the same amount each pay period. No fuss, no muss. There are two problems here. First, you must reconcile that pay with hours worked so you haven’t really eliminated any work from your side…and we can only hope you’re still making that employee clock in and out. The other problem is that you cannot legally use this method if you have a semi-monthly pay period (twice per month). Semi-monthly breaks down to 86.67 hours per pay period. An hourly employee will typically work either 10 or 11 days each pay period. Each time there were 11 days in the pay period you could be fined for not paying in full (88 hours). The 10-day pay period where you paid more than needed cannot count toward the 88 hours due the next pay period. Frankly, it’s just easier overall to stick with paying for time worked and submitted on a timecard.

Worse than the “sunshine tax” we all pay, are the employment laws that will make you pay even more if you choose to ignore them or aren’t even aware of them. California is quite fierce in its protection of employees who aren’t paid correctly or on time.

Bonus Considerations

“As we come to the end of the year, I’m considering bonuses for my employees. Has anything changed I need to know?”

Your HR Survival Tip

Employees typically love to receive cash bonuses at any time. However, as a business, you need to consider whether you are taking full advantage of this particular benefit so your business benefits, too.

The laws have become very picky about non-discretionary bonuses. A non-discretionary bonus is one that is expected and, often, the amount the employee might get is also known based on certain criteria. Many companies have had their bonus plan in place for so long it would likely be considered non-discretionary for legal purposes. Non-discretionary bonuses must now calculate an overtime amount based on any overtime worked by hourly employees over the bonus period. Yes, it’s another strange calculation California requires so let us know if you need help with it.

If you want a discretionary bonus plan, employees should haven’t any expectation of a bonus, should wonder if there will even be one, wonder when it might be, and have no clue about how much they might receive. Does your bonus plan fit this? If not, it could be considered non-discretionary. A true discretionary plan is basically a total surprise to the employee.

The biggest problem with a discretionary bonus is the inability to create a plan. Aside from the legal label of your bonus plan, have you given any thought as to why you’re providing a bonus? If you’re just trying to share the wealth and provide employees with a bonus when it’s been a good year, perhaps a profit-sharing plan would be better.

If you do want a more formal bonus plan (non-discretionary), make sure you’ve set it up so employees realize they actually have to earn it. Have quarterly goals set for the company, the department, and the employee. Consider the payout date if you’re doing an annual bonus and whether or not the employee must still be employed by you on the payout date. Also, what happens to those employees who haven’t worked the full year? Overall, you shouldn’t be providing a bonus if the company doesn’t meet certain revenue expectations or certain goals aren’t met. Bonuses are a reward for helping the company succeed. An employee shouldn’t be earning a bonus if they haven’t met their goals or aren’t doing a good job. Remember a bonus will appear as a big gold star on the employee’s file and will work against you if you want to terminate them for poor performance a month or two later.

Use bonuses to make sure your company is moving forward. Rather than throw money at employees, make them work for it. Both the company and the employees will come out ahead if you do.