Posted by Stacey Mark on 03/12/2010 at 03:00 AM in Compensation | Permalink
|
Posted by Lori Bauman on 08/10/2009 at 10:50 AM in Compensation | Permalink
|
A common problem for family-owned corporations involves compensation. The Tax Code allows the corporation to deduct "reasonable" compensation. Pay too much, and the IRS might re-characterize the excessive compensation as a non-deductible dividend. Pay too little and the IRS may assess penalties and interest for underpaying employment taxes. A common example: mom and dad own the business but their three sons run it. Their daughter is listed as a corporate officer but does not provide services to the company. She receives payments equal to her brothers, in order to avoid hurt feelings. Since she provides no services, all of the payments are nondeductible, taxed at the corporate level (at corporate rates) and again taxed to daughter personally. When considering how to compensate family members, keep in mind several things: In our example above, since the sister does not work for the corporation and is not an owner, she cannot receive either compensation or distributions. If the goal is to provide income to the sister, that will require she provide services to the corporation (perhaps as a Board member, if not as an employee) or become a shareholder entitled to dividends.
Posted by John Walch on 08/05/2009 at 11:45 AM in Compensation | Permalink
|
The federal minimum wage increases to $7.25 effective July 25, 2009. For more information, go here.
Posted by Stacey Mark on 07/24/2009 at 08:45 AM in Compensation | Permalink
|
One of the many frustrating aspects of owning a business is keeping up with all of the laws relating to employees. If the deluge of class action litigation over the last few years tells us anything, it is that some of the most common -- and costly -- mistakes made by businesses are in the area of wage and hour compliance. Many of these mistakes are easy to avoid by having standard operating procedures in place.
Topping the list of wage and hour pitfalls:
And these are just to name a few. In addition to paying employees the wages due for any actionable wage and hour violation, employers may be liable for multiple statutory penalties, interest, attorney fees, plus administrative penalties imposed by the state. Where multiple employees are affected, the damages can be in the tens of millions of dollars (for example, in 1999, Microsoft paid in excess of $92 million to settle a class action involving misclassification of workers as independent contractors -- another wage and hour nightmare). On top of that, many wage and hour violations carry criminal penalties.
All of these problems can be avoided. First, before you put procedures in place, make sure you have someone on staff who understands the law. If you are wearing too many hats to take on human resources yourself, consider hiring a staff person (in the long run, it's cheaper than the alternative). If your business is too small to justify hiring someone in this role, hiring a consultant or outsourcing is an option. Whatever your needs, we're here to help.
For further information on wage and hour compliance, go here.
Posted by Stacey Mark on 07/16/2009 at 04:02 PM in Compensation | Permalink
|
In an attempt to avoid some of the headaches associated with having employees, many businesses will hire workers as “independent contractors.” The primary advantage to hiring an independent contractor is that the business does not have to pay or withhold for taxes, social security, or unemployment, or provide workers compensation coverage or fringe benefits. The problem with this approach is that simply calling a worker an independent contractor does not make it so. State and federal laws define the circumstances under which independent contractor status is available, and misclassification of workers can be extremely costly.
An independent contractor is the person or entity you hire to perform a service completely unrelated to your business. A classic example is the company you, a candy manufacturer, hire to put a new roof on your building. The roofer has an established independent business, multiple clients, its own workers, and the equipment needed to perform the work; it schedules the work at its convenience and it sends you a bill. Typically, you have no say in who the roofer hires as employees, what hours they work, or how the work is performed. You tell the roofer your desired result and (hopefully) it does what you ask and goes to the next job. In contrast to the roofer, if your worker does not own and operate an independent business through which he/she is providing services to you and others on a regular basis, the worker is probably not an independent contractor.
Misclassifying employees as independent contractors can bankrupt a business. Both federal and state laws require employers to pay employees minimum wages and overtime, and maintain accurate records of hours worked by non-exempt employees. Exempt employees must receive a minimum weekly salary. These compensation requirements cannot be satisfied by stock or other forms of non-cash compensation that may be paid to independent contractors. In addition to claims for unpaid wages, the failure to comply with minimum wage and overtime laws may subject a non-complying employer to claims for final pay violations and liability for non-payment of taxes, FICA, FUTA, benefit contributions, the value of lost benefits, plus penalties, interest, other damages, and/or attorney fees. If a worker is injured on the job, he/she is free to assert a negligence claim against the employer, whereas an employee would have to rely solely on workers compensation. An employee may also assert claims for harassment or discrimination, which are otherwise unavailable to an independent contractor. The failure to comply with statutory requirements applicable to employees could also invalidate post termination restrictions, such as non-compete and non-solicitation obligations.
Before classifying anyone who works for you as an independent contractor, check the law or call your lawyer. At Ater Wynne, we deal with this issue all the time and will be happy to help. For a more detailed overview on misclassification of independent contractors, go here.
Posted by Stacey Mark on 07/02/2009 at 09:57 AM in Compensation | Permalink
|