President Barack Obama, in his recent State of the Union address, encouraged Congress to approve a bill that would increase the federal minimum wage from $7.25/hr to $10.10/hr. Whether you are for or against the pay increase you need to be prepared for its effect. Here are three payroll reminders to consider if the federal minimum wage increase is approved:
- You must implement the increase as soon as the law takes effect for minimum wage employees -- even if it occurs in the middle of a pay period. Also, make sure you know if the federal minimum wage becomes higher than your state's minimum wage because, by law, you must pay the more beneficial of the two as soon as it goes into effect.
- You may pay your employees more than minimum wage and therefore think that this increase will not apply to you; however, if you withhold garnishments from your employees it can apply to you. For example, a creditor garnishment carries a maximum amount of 25% of the employees' disposable earnings or the amount that exceeds thirty times the federal minimum wage -- whichever is highest.
- Be aware of the deductions you are taking out of your employees' paychecks. By federal law you cannot take deductions from an employee that would drop their overall pay to less than the federal minimum wage.
If the bill passes follow these payroll reminders to ensure you are in compliance and do not violate the Fair Labor Standard Act (FLSA).