When it comes to paying your employees, there are many rules and regulations to keep in mind in order to stay in compliance with the Fair Labor Standards Act (FLSA). Chances are, you’re aware of all the statues that regulate wages, overtime pay, and other similar ideas. However, not everything is quite as clearly defined as these, and there is a lot of gray areas that payroll professionals struggle to understand. And, as if this isn’t confusing enough, these guidelines have a tendency to vary somewhat from state to state. As a Michigan-based payroll and HR software company, we at Dominion have all the resources you need to break down some of these regulations in order to make sure you’re ready to process payroll and avoid any fines and penalties that might sneak up on you.
In Michigan, employers must designate regular paydays for their employees. Those days can be distributed in the following increments:
Once per month
In this instance, you must pay employees no later than the 1st of the month following the month in which the wages were earned.
Twice per month
If you pay your employees twice per month (otherwise known as semi-monthly), you must pay employees for wages earned during the first 15 days of the month on or before the first of the month directly following. Any wages earned from the 16th to the last day of the month must be paid out on or before the 15th of the following month.
Every two weeks or every week
Whether you pay your employees every two weeks or every week, you must do so within 14 days of the end of the pay period in which the wages were earned.
So long as you’re meeting the above minimum criteria, you are always welcome to pay your employees more frequently than once a week.
I know it sounds confusing when spelled out like that, but once you’ve decided on a frequency it’s significantly easier to break down the specifics.
So what happens when an employee leaves your organization? Whether the employee is fired or laid off or terminates employment voluntarily, you must pay that employee all wages they are owed by the regularly scheduled payday for the period in which the termination occurs. The only exception to this rule is in the case of hand harvesting employees. If an employee harvests crops by hand, they must be paid within one working day of termination.
It’s worth noting that Michigan does not have any laws specifically in place that address paying employees who leave employment due to labor disputes (such as going on strike). However, your best bet is to pay these employees their wages due by their regularly scheduled payday in order to avoid falling out of compliance with other known laws.
There are four primary methods of issuing pay: cash, check, direct deposit, or paycard. The FLSA doesn’t have any statutes in place that dictate what method of payment you should be using, so it’s up to employers to choose what they feel best fits their organization. There are, however, policies against implementing fees on employees for withdrawing their pay once it has been added to their account. Employees are also provided the freedom to select which financial institution their check is deposited to if the employer offers a direct deposit option.
For those businesses that operate in Michigan that opt to use paycards, you must make sure the following is true:
Employees can transfer or withdraw their funds once per pay period without incurring fees.
Requests from employees to change their method of payment must be implemented within one pay period.
Employees must be provided 21 days’ notice before any changes in fees or terms take effect.
Employees must be able to check their balance without incurring any fees.
Paycards may not be linked to any credit line, loan or cash advance.
Employees must be offered written disclosure illustrating how they may obtain balance inquiries without fees, how they may change their payment method at any time, and reiterating that the paycard is not a savings or checking account.
If your organization does not reside in Michigan, I strongly advise you to review the rules and regulations that are in place for your state.
If an employee (current or former) fails to retrieve or cash their paycheck, it falls to the employer to contact the employee before they reach abandoned status. Employers must prove that they have made a diligent effort to contact the employee before transferring those funds to the appropriate state agency. In Michigan, unclaimed wages are considered to be abandoned after 1 year.
In the event that an employee becomes deceased during their term of employment, it’s important that you understand the rules in place within your state. These rules will vary in the maximum amount to be paid out, to whom, and what conditions apply. In Michigan, employers must pay out all unpaid wages earned by the employee including any fringe benefits to whomever the employee deemed as their designee. If the employee did not assign a designee, the wages will be allotted to the employee’s surviving spouse, children, or parents, in that order.
There is certain information that must be reflected on each employee’s pay stub. In Michigan, you must have your pay stubs depict the employee’s hours worked, their gross earnings, the specific pay period, and a detailed list of their deductions. After that, it is up to the employer to include additional information if they so choose. Additional information you may want to consider adding is your employees’ PTO balance, their 401(k) match, and health benefits paid on behalf of the company.
As you can see, there is a lot of important information you have to keep track of when it comes to processing payroll. However, that doesn’t mean you have to face it all alone. Having a quality payroll service like Dominion’s at your disposal will make sure you’re processing payroll as efficiently as possible while staying in total compliance with FLSA regulations. Request a free demo today to see what we can do for you!