Paying employees right: What’s the big deal?

with Katie Bardaro, Director of Analytics and Lead Economist at PayScale

The President’s proposed changes to the Fair Labor Standards Act (FLSA) are still under review, but that doesn’t mean you should forget the whole thing (tempting though that may be). Managing pay reactively generally doesn’t result in the best decisions.Compliance is boring, we get it

Wage compliance issues probably won’t top anyone’s list of “Things I Do for Fun,” but it’s a necessary part of the business. What’s more, staying up to date on regulations en-sures you’ll be paying your employees fairly—and that’s huge, because fair pay is core to the employee-employer relationship.

Put another way, if your pay practices aren’t in compliance with all local, state, and fed-eral regulations, you’re fundamentally failing your employees.

Fair pay requires more than good intentions

In 2014, 8,086 FLSA cases were filed with the Department of Labor (DOL). This number represents an increase of more than 19 percent since 2011. (On a side note, it looks like HR Bartender was spot on to identify FLSA concerns as a top compliance issue for 2014.)

No doubt, some of the increase can be attributed to an upsurge in worker awareness of wage and hour rights. Richard Alfred, Chair of Seyfarth’s Wage & Hour Litigation Practice Group, estimates the number would be even higher if it included wage and hour law-suits filed at the state level.

And while some of the exposed employers knew all too well their pay practices were sketchy, many more likely had no idea. However, good intentions aren’t the end all be all when it comes to wage and hour infractions.

There’s no downside to good pay practices 

Worker complaints aren’t the only reason the DOL comes knocking on an employer’s door. The DOL also investigates in response to 5500 reporting errors and in conformance with its random auditing processes.

The good news? Solid pay practices provide some insulation. You can’t stop the DOL from choosing your company in a random audit, but you can take care to have your de-fenses in order, and by defenses I mean documented proof your pay practices are fair and lawful.

But there’s more. Good pay practices provide a return on investment every day of the week.

In a formal statement about House Bill 1646, also known as the Equal Pay Opportunity Act , PayScale’s Director of Analytics and Lead Economist Katie Bardaro wrote, “By enabling employees to understand compensation decisions and their own market value, businesses will cultivate an engaged workforce. An engaged workforce ultimately leads to stronger businesses, which, of course, has a positive impact on the economy as a whole.”

Regardless of your opinion of House Bill 1646 (or other proposed bills like it), understand that by default good pay practices are first, lawful, and second, facilitate transparency, clarity, and fairness.

I’d say that’s a pretty big deal, indeed.

Need a refresher course on the FLSA? Download PayScale’s FREE whitepaper, Employee Classification Primer now!


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