In order to maintain compliance, organizations should review the Fair Labor Standards Act (FLSA) exemption requirements to ensure seasonal employees are properly classified on a regular basis.
Proper Employee Classification
Employees are classified as non-exempt from FLSA — those who qualify for overtime pay for hours worked over 40 hours in a workweek — and exempt — those who do not qualify for overtime pay. This becomes a critical financial issue during seasonal hiring periods because you may need to add to workers' typical weekly hours to cover additional customer traffic.
To qualify as exempt, a worker must be paid a set salary each week that meets or exceeds the minimum salary threshold described under the FLSA. Additionally, the employee must perform certain job duties in order to qualify for an exemption. Employers should review a candidate's job duties and salary prior to their hiring to determine whether they might qualify for an exemption. Employers should continue to review the job duties the employee actually performs - as opposed to what is in their job description - to ensure they continue to meet relevant criteria.
To help keep up with these variables and remain compliant, you should consider investing in an automated time and labor management system that will automatically recognize when an employee's status changes between non-exempt and exempt and make the necessary adjustments to overtime pay (if any) and withholding.
Independent Contractors vs. Employees
More overtime means not only costs for higher wages, but also higher payments for portions of Social Security and Medicare taxes. Consider reviewing needs to determine whether it makes good economic and business sense to hire independent contractors especially if you are looking for someone on a short-term basis, or to work on an isolated project.
Bona fide independent contractors do not impose the same tax and overtime requirements on businesses, however, there have been certain tests imposed by state and federal agencies and employees and independent contractors are not interchangeable. For example, under the IRS Common Law test, employers may not control how, when or where an independent contractor performs their work.
Finance leaders should balance their budgetary concerns with the need for consistent, steady quality of work. The cost of training seasonal workers and increased overtime pay needs to be balanced against the additional quality these workers may provide — meaning more satisfied customers and better customer retention.
Finance executives should consult with HR to see if their seasonal workers qualify for overtime, and then work together to determine the best way to balance the necessary seasonal staffing additions with the need to stay doggedly compliant with overtime regulations and applicable FLSA classifications.
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