What Is Employee Compensation

When you hire someone you have to compensate them with payment.  Payment is a form of compensation that you give to someone in return for their labor.  Compensation is usually in the form of money.  There are two forms of financial compensation Wages and Salary.  Quite often the terms Wages and Salary are used interchangeably.

Compensation in terms of wages are given to Workers.  Wages is a set amount you pay someone based on the number of hours they work.  Wages is a direct expense and is usually included in the production cost.

Compensation in terms of salary is given to Employees.  Salary is a set amount you pay someone regardless of how many hours they work. Salary is a indirect expense and is usually included in administrative cost.

What Is A Worker

Workers are people that you hire to perform a specific task and are compensated for how many hours they work.  Once paid the relationship between the employer and the worker is ended.  Workers account for their time on a time card or other record keeping system.  Depending on the company, they may earn overtime for extra hours worked, or be expected to take time off to offset any late hours within the same time period.

What Is An Employee

Employees are compensated with a salary which is paid on a regular basis such a weekly, monthly along with related benefits such as health insurance and retirement. Salary is usually fixed depending on the industry and geographical area that you're working in.

What Is The Frequency of Employee Compensation

How often you must pay your employee depends on the state where you business is located.  The states set payment frequencies.  Payment is usually required on a weekly, bi-weekly, semi-monthly or monthly basis.

Visit the Labor Depart Wage & Hour page to see states requirements.

What Should You Pay Someone

Federal and state laws set minimum wages that you must pay your workers and employees.  Visit

According to the Department of Labor Workers who are covered by the FLSA are entitled to the federal minimum wage of not less than $7.25 per hour effective July 24, 2009.  In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages.  See minimum wage chart.

The state minimum wages ranges from $0.0 to $10.74 per hour.   The following states do not have a minimum wage requirement:  TN, SC, MS, LA, and AL.

You can be granted an exemption to the minimum wage rule if you have employees under the Fulltime Student Program.  The DOL will grant you a waiver to pay less than 85% of the minimum wage.

The right pay will enable you to keep skilled employees. If you don't want to loose good employees you have to offer competitive pay.  Pay should be high enough to prevent a good employee from going to work for your competitor but not so high that it hurts the bottom line.  In order to determine what is a good starting point visit the following sites below.

The minimum age requirements do not apply to minors employed by their parents, or by a person acting as their guardian. An exception to this occurs in mining, manufacturing and occupations where the minimum age requirement of 18 years old applies.

Visit the Bureau of Labor Statistics website to see the Average Compensation by Region

Visit the Bureau of Labor Statistics website to see Compensation Survey by Region and Profession

Visit the Bureau of Labor Statistics website to see Compensation Survey by state

Do You Have to Give Your Employees Overtime Pay

Overtime pay is covered by federal and state laws.

According to the federal Department of Labor, Overtime pay at a rate of not less than one and one-half times their regular rate of pay is required after 40 hours of work in a workweek.

The Fair Labor Standards Act (FLSA) does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime hours are worked on such days.

Under the Fair Pay rules certain employees such as executive, administrative, professional and outside sales employees are exempt from the Overtime pay rules.

States laws also covere overtime pay.

Rest Periods

Wage Garnishment

The wage garnishment provisions of the Consumer Credit Protection Act (CCPA) protect employees from discharge by their employers because their wages have been garnished for any one debt, and it limits the amount of an employee's earnings that may be garnished in any one week.

As an employer you must be familiar with wage garnishment rules.  Learn more by visiting the Federal Wage Garnishment Law, Consumer Protection Act’s Title 3 (CCPA)

Enforcement

The Wage & Hour Division's of the Department of Labor enforces the FLSA.  Their investigators are scattered throughout the country and look for violators to prosecute.

Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to a civil money penalty of up to $1,000 for each violation.

Willful violations may be prosecuted criminally and the violator fined up to $10,000. A second conviction may result in imprisonment. Violators of the child labor provisions are subject to a civil money penalty of up to $10,000 for each employee who was the subject of a violation.

Learn more by visiting the FLSA website.