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pay workers hourly or salary

3K views 23 replies 11 participants last post by  LawnLad 
#1 ·
I pay our guys hourly. I was thinking about switching them over to salary, save a lot of time on payroll, don't have to worry about 15 mins, here 15 mins there. I was just wondering what you guys use, and what do you think of it? thanks
 
#3 ·
none on salary yet. but i have a couple "good" employees that i will offer it to in the spring . prob here is that hourly workers have little (snow) or no cash flow in the winter. so often they start listening to other offers as the season dies down.

one guy has asked for salary. when i asked what he was looking for he said lets just figure out what i would make in the summer, add the (lesser) amount from the winter and then divide it up evenly over the year. in other words he is just looking for smooth cash flow. Now we all know if he could budget there is no reason to need to be on salary. but he needs the forced budgeting.

the way i see it it costs me approx. the same per annum, yet this guy has some stability. and so do i, as his chances of returning the folowing season are much higher.
 
#4 ·
If you are considering salary for everyone, be aware that wage & hour will consider that salary figure for a 40 hour week:

If you are paying someone $400 salary, that means he is getting $10/hr. So he works 35 hours this week, and 45 hours the next, it's a wash, right? NO!!! The 45 hour week is figured at $400 for 40 hours, time and a half over that. So that week is $400 + 5x$15 = $445.

Of course, you might get away with it if nobody ever complained. But if someone does, they go back years to correct your payroll. A nearby lawn business had one ex-employee complain to wage & hour about a similar salary situation back in mid-80s, and it cost the business $70,000 in back payroll.

You can legitimately pay a salary for someone in a supervisory or managerial position, but more than half (I think it's half) his time must be spent on managerial duties. Example, a crew supervisor, who goes out and works with the crew: if his labor time is more than half total time, you cannot put him on true salary.
 
#9 ·
groundkprs

In your example: 45 one week equals 40 @10 and 5 @15 for a total of 475 and the other week is 35 @ 10 for a total of 350

Grand total of 825 instead of 800

The key is to keep good track ofhours worked etc.

My salaried guys sometimes take off for dentist etc.....

That is not in the course of a normal work day therefore they could be docked for it. If they ever came and audited me on the salaried guys because one of the salaried guys complained........they would owe me money!

We average approximately 43 hours per week over the course of a year which includes major down time around the holidays etc....

If push came to shove, I'm sure I would get slapped on the hand, but I don't think I would owe any money. You are allowed to overpay someone....therefore on the weeks they worked 20 hours but got paid there salary for 40....They would owe me money. I think it would be a wash.
 
#10 ·
Thanks, Tony. Will use this winter to review third grade math. LOL. Should have been $475.

But, at least here, a 35 hour week and a 45 hour a week are not a wash to wage & hour. The 45 hour week is 5 hrs time and a half, even if the sandwiching weeks are only 20 hours. I also believe DOL looks at it this way, too.

Even in your situation of avg 43 hours, you could pay $445 salary each week (40@10+3@15). But if the bean counters come in, they don't care about averages. What matters is what's really on the time cards. And you don't even want to see them if you don't have time cards, or some record of work hours.

There are special situations, either defined by statute (policemen and firemen here, I think), or by adopting special work hours under union and/or special regs (certain factories around us run 12 hr shifts up to 5 days straight, but have lots of days off).

If one is so confident of his policies, but wants to really be sure how the regulators might view it, wage & hour and DOL will gladly meet with you and criticize your system. I went to them when I was setting up for employees years ago, and they were very helpful. Even approved a wild bonus system I proposed.
 
#11 ·
For wage and hour overtime is calculated on a seven day period. Every employer has to have a designated work week. It can start any time, but must be the same period all the time. Over 40 hours during that seven day period determines overtime, doesn;t matter if it is 16 hours today and 3 tomorrow. 40 hours in seven days.

Doug Austreim
 
#12 ·
Trust me, I've been through this a million times with guys right here on lawnsite and other places. I realize what the rules are...I choose to disobey them. And, I keep meticulous records....if anything I would get some sort of a fine but would NOT OWE BACK PAY. My guys get time off very liberally during the winter months that is not vacation or sick time. Therefore the occasional 50 our week, EVEN PAYING 10 hours of overtime would be a wash.

The 43 hour week average is just that, an average.

I'll take my chances, all employees have been around quite awhile, are overpaid, and quite happy. If I ever have a problem with one of them, I'm sure they will stay away from lodging a complaint.

I was always told, don't open up a can of worms with a Government agency, they will always find something wrong. Therefore, my advice would be to keep accurate records and pay how you want to. if someone ever lodges a complaint, get a lawyer. Bet I'll come out okay, no matter what you guys say.

Besides, if any of us got audited, I doubt any of us would get off without some sort of penalty. Right? Or are there some guys here who do everything by the book? If there are, more power to ya, but I'll bet you are doing something wrong that you don't know about.

Peace
 
#13 ·
I'm sorry but you may think it will be a wash, but I fear that the DOL will care less about how many weeks your people were over paid, They will only look at the weeks that you didn't pay overtime and they will make you pay back wages.

I'm really surprised that any one would post on an open forum that they are knowingly breaking the law That blows my mind



Doug Austreim
Austreim Landscaping Inc
 
#14 ·
http://www.dol.state.nc.us/wh/fwohand.htm
http://www.entrepreneur.com/Your_Business/YB_SegArticle/0,4621,298161,00.html

"Half-Time" pay is legal in many states for salary "non-exempt" ...basically you only have them "half time" for anything over 40 to perform the work of a normal work week.

So if they make $400 for a normal week (40 or less hours) .....then the next week worked 50 hrs week ....than the straight pay was 50/400=$8 per hr ....the OT rate is 1/2 of the straight pay ....$8 hour for this week example ....so OT was $4x10=$40 extra or $440 for this week

for those wishing to stamp em as "exempt" here's a good info link ... Employers' non-compliance tends to fall into one of eight (8) areas ==>
http://www.gilliland.com/Salaryot.htm

Sorry to say ....as I hear ya .......but there is no "wash" ....either they are exempt or not .....n if not they gotta atleast get "chinese overtime"
 
#15 ·
mr. autstreim

It blows my mind that you think the DOL is surfing the web looking for guys like me.

After going to the dol website, it is true, I may not be in compliance, however, the d.o.l. is in place to take care of the interests of our employees........and that being said, mine will never complain.

it appears that most problems arise AFTER the employee complains about being shorted a day on his paycheck even though he is salaried. Then the d.o.l. decides to check in and finds out the employer is not in compliance. I do not short my guys EVER. not for rain or anything, nor do I require them to make up days on weekends.....EVER.

While it is true that I am not doing the right thing, my employees would rather it be this way than to go hourly. If they were hourly they would make far less money, even with the overtime. I would scrutinize their paychecks even more if they were hourly and keep them home if there was not a full day of work for them. I would lump all the jobs together into a full day and then call them in. I don't do that now, if it is a short day, then it is a short day....my loss. Long day, their loss.

In my opinion, the laws regarding this are outdated and silly. I will take my chances with them, just like most people take their chances with other "laws".

I take it you follow all laws to the letter mr. austreim? If that is the case, I apologize for even contributing to this thread. If that is the case, I bow down to your lawfullness and lay in shame at my lawlessness.

I can't decide if you want to argue this thread because you truly believe I am screwing my employees or if you are trying to steer another guy in the right direction. My employees are very well cared for and not getting screwed at all.

so....shall we continue this tirade or let it rest? You are right by the letter of the law, I am wrong. I am doing what is best for my employees and guaranteeing them full paychecks and what is helpful for me because I know my labor budget. That is my choice and I stick by it. No harm/No foul in my opinion.
 
#16 ·
Originally posted by GroundKprs

You can legitimately pay a salary for someone in a supervisory or managerial position, but more than half (I think it's half) his time must be spent on managerial duties. Example, a crew supervisor, who goes out and works with the crew: if his labor time is more than half total time, you cannot put him on true salary.
I have a lawn care business and am a FT engineer and we typically never get overtime pay. I do with my company so I am not complaining but ALL of my friends at other co. don't. They work sometime 60-70 hrs/week. We do not have managerial positions either. Just computer grunts. Where do you draw the line between different types of employees?
 
#17 ·
I certainly am not insinuating that you might not be fair with your employees. I am more concerned with a fellow member of this industry. In the past, you would have been right that most DOL investgations began with complaints. That is not the case anymore. The DOL now targets certain industries where they feel the most likley violations will be. In the last few years those targeted industries have been nursery, landscape, poultry processing etc. Those audits are quite often combined with INS audits as well. I have a friend in Maryland in the business that was checked on. He had everything right, but it was a lengthy process to prove it.

I certainly did not mean to offend anyone, but avoiding trouble should be in everyones best interest.

As to wether or not the govt officials might surf the web, I don't know, but if I was going to investigate a targeted industry, I would try to find out as much as I could about it, and the internet might be a good place to start.

Doug Austreim
 
#18 ·
Scott's Turf, the DOL sets very general rules for employee/ employer relationships. In my limited experience, it is the state wage & hour commission that does most of the enforcing. And remember that rules can vary dramatically from state to state. Most offended employees will go to a state office first. I do believe that many white collar jobs are exempted from that managerial rule. As our economy moved away from manufacturing to service and information, the unions held the line for blue collar workers, so big business shafted white collar workers, who had no organized voice. I was mentioning the managerial/salary issue because it would apply to us in the green industry.

And I am sorry to cause an uproar here about the right way to do it. I was corrupted by my parents to believe that you should do everything as good and as honest as you can. And my Dad was a stickler for details, so I got hung with that albatross, too. Curse you again, Mom and Dad.

Does any one know how you can legally not pay overtime for a laborer who works over 40 hours a week? There is a small way, and I once got really hammered by a small business teacher for saying it. Teacher apologized to me the next class. LOL.

DETAILS, DETAILS, DETAILS!!! If you're gonna cheat a little, how big is "little"? Ask the guys at Enron, Worldcom, Tyco, etc., that question. LOL.
 
#19 ·
Originally posted by GroundKprs


Does any one know how you can legally not pay overtime for a laborer who works over 40 hours a week?
guess: if the worker agrees?

here i know a worker can agree to not be restricted by certain labour laws that otherwise would apply.
 
#20 ·
There are certain requirements that you must meet to qualify for seasonal business status thus allowing you exemption of paying overtime. One that I can remember due to the fact that we recently won a case of overtime claim is this: You must earn at least 75% of your business income within a 7-8 month time frame. Even though we snowplow ( erratic at best ) not enough income is reported in these off winter months so that the above exemption is met. This is a state of NH verdict and laws will vary from state to state. And for those of you who cite federal laws, look closely at the exemptions. This came after a very close worker under our employment whom was treated like a family member earning $15 an hour for mowing only was terminated and then decided to take a retaliatory action at us to claim no overtime was paid to him. Not during over the years did he ever ask or complain about his $975 gross weekly paychecks for working some 65 hour workweeks. His work performance was maybe around 75%, but with good labor being so hard to find, his performance level was accepted. Not to mention, did he really think I would pay someone $22.50 an hour to sit on a $10,000 mower and not sweat? When another new hire was brought up to aleve long hours during the busy season, he would always wig out and say he needed the $ and didn't mind the hours. And Jim is right about the salary issue. My corporate lawyer said that the labor dept views salaried workers as "white collar" and if we hadn't won the verdict and chose to put people on salary to avoid OT, they would not view this "blue collar profession" as a professional job, so putting them on salary would not avoid the OT. I know of many LCO's locally who offer the extra above 40 hours at normal pay and have never had a problem or suit brought against them. Although some I know pay time and a half, but start their workers off at $9 hr, so OT for them would be only $13.50 an hr, 50 cents an hr less than what I pay my workers for full straight time for all the 40 hours plus some. You would think that someone would appreciate being paid a premium pay of $15 an hr for 50-60 hrs a week, than one getting $9 for 40 hrs, and then 10hrs at time and a half.

Mike
 
#21 ·
Mike has a good point on the seasonal business status. I never investigated that area, so I won't comment even for my state.

On the OT issue, I could hire someone today and work him 80 hours a week for straight time and be perfectly legal. He could quit, of course, but in no way would any govt office be able to assist him in getting me to pay him time and a half for overtime. Remember I work solo now.

Very few people outside DOL (and few inside, I suppose, LOL) know that DOL regs apply only to businesses employing two or more people, or to business grossing $1 mil a year or more.

So when I hire my first worker, I am not covered by DOL regs, or by my state wage & hour regs. (NOTE: state regs may vary by state. But most states don't go harder than feds.) Only when my one worker and I gross $1 mil a year cuttin' grass (LOL, LOL!) will he be covered by DOL regs. Or all will be covered as soon as I hire the second worker. This won't work in any type of corporate structure, because you are the first employee of the corp.

This can be helpful to a new business with only one other employee, if the employee is hungry enough, or loyal enough, to work extra hours at straight time. Example: rain 3-4 days this week, gotta work 60+ hrs next week.
 
#22 ·
I don't know about other states, but in Ohio you can pay an working foreman/supervisor who does spend more than 50% of his time producing a straight salary. The catch being that it has to be agreed upon by both parties, preferably in writing.

I've had several guys over the years ask to be paid salary since they don't want the fluctuations in pay during the season. So we worked out a salary that was based on historical information for the hours they worked during a year. It works out to about 2200 hours (1900 regular and 300 OT). We took an hourly rate and applied it these hours. We determined the scheduled work days. We monitor hours for a salaried employee no differently than we do hourly. If there is a big discrepency at the end of the year as to the number of hours they worked, we'll adjust the pay with a bonus in some fashion.
 
#23 ·
I think there is a lot of confusion here between state and federal regs. True there are many state exemptions and differences but those only apply to those businesses that are not in any way involved in interstate commerce. Lawn maintainence business that handle no products possibly would be exempt from federal regs. Most landscapers and irrigation people etc would not because most likely during any given week they would handle a product that had crossed state lines. An example I was given once was a nursery. If the nursery grew all of their own plants and the worker handled only those plants, he would be exempt;, however, if he so much as moved one pot that had been shipped from out of state and moved it 6" once during the work week, he was subject to federal law for the entire week.

To be safe, I would reccomend that anyone contemplating using anything other than federal minimum wage and overtime rules get competent legal advice from someone that specializes in these things. Often your national trade organizations such as ANLA can provide that kind of information.


I sometimes think that in these forums we get to giving a little too much legal advice, that perhaps we should be more careful about what we state as facts if we aren't 100% sure.

Doug Austreim
Austreim Landscaping
 
#24 ·
Doug - I think you're right that we should all seek competant professional advice. Better to check with your attorney/CPA - after all, that's why we hire them.

My understanding is that Federal OT laws state that if you're company generates more than $500 K in sales you're required to pay OT. However, if you're state law dictates a lower minimum, then you fall under your state's rules. For instance, Ohio is $150,000 trigger. Therefore, if you're doing under $150 in sales in Ohio, you're neither required by state or federal regs to pay OT. Whether or not your existing or prospective employees see this as okay is another matter.

Obviously there are other ways to compensate and pay your employees and if it's a method a little off the beaten path, it's ceratinly worth checking out with an attorney/CPA.
 
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