I. Overview
II. Financing and the Business Plan
III. Permits, Licenses, and Other Legal Concerns
IV. Organizing Your Business
V. Hiring Employees
VI. Employee Pay and Compensation
VII. Business Insurance

Employee Pay and Compensation

The federal Department of Labor and state agencies regulate many aspects of employment, ranging from overtime and child labor to the minimum wage and recordkeeping. These laws are often very complicated. In order to avoid legal problems, you should consult with an attorney with experience in business planning and employment law.

The Fair Labor Standards Act (FLSA) sets many of the standards employers must meet. Here are some of the requirements of FLSA:

• Minimum Wage. The federal government requires all employers to pay a minimum wage of $5.15 an hour for covered nonexempt employees. Employees who make at last $30 a month in tips do not qualify for the minimum wage; however, their pay plus tips must be the equivalent of at least $5.15 per hour.
• Child Labor. The FLSA prohibits persons under 18 from performing certain jobs.
  Weekend, Night, and Overtime Pay. The government does not mandate extra pay for work on weekends or nights. However, any time worked past 40 hours per week must be compensated at an overtime rate of at least 1 1/2 times the regular rate. Employees 16 and older can be required to work any number of hours, as long as overtime is paid.
• Vacation, Sick, and Holiday Pay. The FLSA does not require pay for time not worked.
• Severance Pay. The FLSA does not require severance pay.
• Breaks and Meal Periods. The FLSA does not require breaks or meal periods.

A number of employees are exempt from FLSA provisions. In most cases, these exemptions are
interpreted in favor of the employee, who must nevertheless meet strict requirements. Employees exempt
from overtime pay include:

• Sales personnel who make more than 1 1/2 times the minimum wage.
• Computer and IT personnel making at least $27.63 an hour.
• Drivers, mechanics, and other employees whose duties impact the safety of vehicles involved in transporting goods or passengers.

Some employees are exempt from FLSA’s overtime and minimum wage requirements,
including:

• Sales personnel and mechanics who work for an auto dealership.
• Farm workers. Young farm workers can also be exempted from child labor laws.
• Seasonal and recreation employees.
• Administrative, executive, professional and sales personnel who receive a salary.

Keep in mind that while this overview covers FLSA requirements, state and local laws may have much stricter requirements.

In addition, there are a number of other federal laws governing employment. The Family Medical Leave Act (FMLA) allows some employees the right to take 12 weeks of unpaid leave to attend to family or medical matters. Military personnel are granted some job-related rights and protections. The Employee Retirement Income Security Act (ERISA) mandates certain requirements for the administration of pension plans. The issue of employee pay is very complex, and the number of state and federal regulations governing the issue make it vital for any business owner to have the advice of an experienced attorney.

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