Idomeneo » Newsletter – January, 2011
Newsletter – January, 2011
In this Issue:
- A Message From The CEO
- To Be Or Not To Be…An Employee
- Part 1 – Employee or Not?
- Part 2 – Overtime or Not?
- Alerts
- Did You Know
- Site To See
- The Reading Corner
__________________________________________________________________________________
A Message From The CEO
It’s a new year, and I think our thoughts naturally turn to new beginnings. Resolutions (I’ve finally decided I am way too old for that, tried it, didn’t like it, not doing it again!); new projects; leaf turning. Time to start all those good behaviors, rev up the energy, clean things out, start fresh. But I actually think of this as a time to remember, return and recommit.
You are a successful leader, you know what needs to be done, you just need to be occasionally reminded.
You know that it is so easy to let the clutter of the everyday pull you from the vision you hold for your company. You know that the most important job you have is to hold the vision, clearly communicate it to your team, and ensure they have the tools they need to execute on your vision. You know that your team thrives under guidance and leadership. You know that they will wither under micromanagement. You know that you have to deal fairly but swiftly with non performers because they do great damage to the engine of the company. You know that you have to let go of the daily detail tasks and focus on the strategy, because that is where you hold the most value for your company’s success.
You know that to bring your A game you have to have enough rest, eat reasonably well and rest your brain by enjoying family and friends. You know that you are more easily creative and innovative when you play as well as work.
This month, we are going to remind you of the HR 101 issue of employee classification, and update you on a few new items for 2011. In addition, I hope the reading selection will jog your memory on what it takes to build your business, and the featured web site will help us all remember to be good to our planet.
So, Happy New Year. Remember what you know (write it down, that helps), return to your vision and recommit to doing what it takes to move the ball every day.
Vicky Brown
CEO
Idomeneo Enterprises, Inc.
__________________________________________________________________________________
To Be Or Not To Be…An Employee
I know you have heard it before – be careful how you classify your workers. Is she an employee or independent contractor? Are they eligible for overtime or not, who decides, can the employee and employer come to an agreement. Well, the answers are -”it depends”, “it depends”, ” the Dept. of Labor” and “no”.
Why such a big deal about employee classification? The IRS wants to be sure payroll taxes are paid for all eligible workers, and the Dept. of Labor wants to be sure employees are being paid for all the work they do, and no employer is pressuring them to work long, excessive hours without pay.
Of course, we have all heard the stories of the plucky little start up that had an office of 15 independent contractors and no employees; or asked all the employees to work for options only; or paid everyone a flat salary no matter how many hours they worked. And while this shows great charismatic leadership, and commitment from the employees – the part we seldom hear is the law suit that is later brought and won against those same companies. Today’s workers are savvy, and while things my seem fine now – as my mother would say “sure, it’s all well and good until someone loses an eye”. So beware, those sleeping issues are bound to awaken some day.
What follows is a primer of the difference between independent contractors and employees; and overtime eligible and exempt employees.
__________________________________________________________________________________
Part 1 – Employee or Not?
An Independent Contractor is actually considered a separate business. Sure, it is a business of one, but a business all the same. As a separate business, independent contractors are not operating under the employer/employee relationship.
An independent contractor is responsible for providing a specific product or service, is paid only for that product or service (not the materials used to produce it, or the time it takes to get it done), uses their independently gained knowledge/experience to develop the product or service, and is free to provide the same or similar product or service to other companies.
That is the foundation of the IRS 20 factor guide. And while the IRS would look at each situation on a case by case basis – these factors can point you in the right direction.
Instructions – employees must comply with instructions regarding when/where and how to work.
Training – employees are free to receive training. Independent contractors generally use existing experience/skills in completion of the work.
Integration – employees’ work is integrated into the business, and is an important part of the success or continuation of the business. And so, they are subject to direction and control of the company. The is not he case with an independent contractor.
Services Personally Rendered – employees do the work personally, an independent contractor may do the work personally or have others complete it – they are responsible for the outcome, not the process.
Hiring Assistants – the employer would hire, supervise and pay assistants that support the employee in completing the work. An independent contractor is responsible for providing whatever assistance/support they would need in providing the product or service.
Continuing Relationship – companies have continuing relationships with employees. Even if the work is intermittent, it is still considered a continuing relationship. This is not the case with an independent contractor.
Specific Hours Of Work – if the company sets or requires specific hours of work, they are showing control over the worker, and that makes them an employee vs. independent contractor. Again, the independent contractor is responsible for the end product only.
Full Time Required – independent contractors are free to provide their services to other companies and/or individuals. So, if they are working for the company full time, they will not be able to offer those services to others – making them more of an employee for the company.
Work Done On Premises – work done at the company’s site or at a location designated by the company is generally done by an employee. An independent contractor is free to develop the product or service at any place they chose.
Set Order or Sequence – employees are required to perform work in an order set by the company (i.e. enter the data in the database system, then file the hard copy). An independent contractor has no such control over the sequence of completion.
Reports – if the worker is required to submit written or oral reports, this further exhibits the control of an employee/employer relationship.
Payments – employees are generally paid for time, by the hour, week or month. An independent contractor is generally paid by the job or straight commission.
Expenses – the company pays the expenses (i.e. supplies, travel etc.) of an employee. As mentioned above, an independent contractor is a separate business, and so is responsible for the expense required to provide the product or service as a cost of doing business.
Tools and Materials – an employee is provided tools and materials needed to perform the job (i.e. computer, telephone, desk etc.). An independent contractor is responsible for providing their own tools and materials.
Investment – an independent contractor has a significant investment in the facilities needed to perform the services. An employee is provided office space.
Profit or Loss – an independent contractor can realize a profit or loss in their business. This is not the case with an employee.
Performs Work for More Than One Person or Firm – an independent contractor is generally free to provide his or her services to two or more unrelated persons or firms at the same time.
Services to General Public – an independent contractor may offer their services to the general public on a regular and consistent basis.
Right to Fire – an employee may be fired by an employer. An independent contractor cannot be fired, but their contract may be terminated – subject to the terms of the contract.
Right to Quit – an independent contractor cannot quit and fail to complete the work without incurring liability. An independent contractor is bound by the agreement they have with the company, and if they fail to uphold that agreement, they are legally obligated to make good.
As you can see, keeping these factors in mind, there are many times companies cross the line into treating their independent contractors as employees. The bad news is, if it looks like it a duck, quacks like a duck, and is treated like a duck – the IRS says it’s a duck. Should you face an IRS audit, and it is determined you were working with a duck, the penalties are considerable – including back payroll taxes.
__________________________________________________________________________________
Part 2 – Overtime or Not?
So, you have concluded that they are, in fact, employees. Should you pay overtime? What are the rules?
First, let’s look at the language. The Dept. of Labor considers every position eligible for overtime, except those jobs that meet certain criteria that make them exempt from overtime rules – otherwise known as “‘exempt” positions. If a position does not meet those criteria, they are not exempt from overtime obligations – otherwise known as “non-exempt” positions.
You’ll notice I keep referring to the position vs. the employee. That’s because, it is the job (not the person in the job) that is considered exempt or non exempt. Therefore, if Mary is an Exec. Asst. and her position is non-exempt, and Joe is an Exec. Asst. in another dept. but with the same job responsibilities as Mary, Joe’s position is also non-exempt.
The determining factor lies in the actual job responsibilities and requirements – not the title, person holding the job, or salary. What are the criteria for exempting a position from overtime? There are six exempt categories; Executive, Administrative, Professional, Computer Professional, Outside Sales and Highly Compensated.
A general overview of each exempt status is listed below – please keep in mind, there may be other criteria that affects the status classification of a position. The issue of exempt vs. non-exempt is very complex and must be evaluated on a case by case basis. The following is provided for general informational purposes only, and does not constitute legal advice – you should consult with your attorney regarding questions.
Executive Employees
An overtime-exempt executive employee must:
- Have as his or her primary duty management of the enterprise or of a customarily recognized department or subdivision of that enterprise,
- Customarily and regularly supervise two full time employees or their equivalent,
- Have the ability to hire or fire employees or be able to make recommendations which are given particular weight regarding hiring or firing or material changes in employees’ status, and
- Be paid a salary of at least $455 per week (or the higher level of twice the minimum wage per week in California).
An individual who is a bona fide 20% owner of an enterprise and who is actively engaged in management of the business also qualifies as an overtime-exempt executive employee.
Administrative Employees
To be an exempt administrative employee, the employee must:
- Have as a primary duty the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers,
- Exercise independent judgment and discretion with respect to matters of significance, and
- Be paid a salary or on a fee basis at a rate of $455 per week (or the higher level of twice the minimum wage per week in California) or more.
An exempt employee’s duties must be directly related to management policies or general business operations. An exempt administrative employee must use independent judgment and discretion. The duties which demonstrate the exercise of independent judgment and discretion include:
- The authority to formulate, affect, interpret, or implement management policies or operating practices,
- Carrying out major assignments in conducting operations,
- The authority to commit the employer in matters that have significant financial impact,
- The ability to waive or deviate from established policies and procedures without prior approval,
- The provision of expert advice,
- The investigation and resolution of matters of significance,
- And similar tasks.
Professional Employees
To be an exempt professional employee, an employee must:
- Have a primary duty which is the performance of work that:
- Requires knowledge of an advanced type in a field of science or learning customarily acquired through a prolonged course of intellectual instruction and study, or
- Requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor, and
- Be paid on a salary or a fee basis at a rate of $455 per week (or the higher level of twice the minimum wage per week in California) or more.
Work requiring advanced knowledge means work that is predominantly intellectual in character and which requires the consistent exercise of independent judgment and discretion. Fields of science and learning are those areas of professional endeavor such as accounting, law, medicine, engineering and the like.
Computer Professionals
In order to be exempt, computer professionals must:
- Have as a primary duty:
- The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functions,
- The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications,
- The design, documentation, testing, creation or modification of computer programs related to machine operating systems, or
- A combination of the above, which requires the same level or skill, and
- Be paid on a salary or a fee basis at a rate of $455 per week (or the higher level of $6,587.50 per month or more, or be paid at a rate of $37.94 per hour in California) or more.
The exemption includes only employees who perform fairly high level systems analysis and programming work. Employees who use computers to perform work, who work closely with programs but who do no programming, or who manufacture or repair computers are not overtime exempt.
The hallmark of a learned professional’s job is that the job cannot be performed without a directly related, four-year college degree. If the job can be performed without the requisite academic degree, the job will not be considered to be overtime exempt.
Outside Sales
In order to be an exempt outside salesperson, an employee must:
- Have a primary duty of making sales or obtaining orders for services or the use of facilities for which consideration will be paid, and
- Customarily and regularly be engaged in such work away from the employer’s premises.
Generally, inside sales employees are not overtime exempt. Only inside sales employees in traditional retail and service establishments which meet the day to day needs of the general public can be classified as exempt, and then only if they meet particular compensation requirements.
Highly Compensated Employees
(Note: this exemption does not apply to California Employees)
White-collar employees earning $100,000 a year or more in total compensation will be exempt if they:
- Are paid a salary of at least $455 per week,
- Are paid at least $100,000 per year, including salary, commissions, non-discretionary bonuses and other non-discretionary income, but excluding benefits,
- Perform office or non-manual work, and
- Customarily and regularly perform one or more of the duties required of an exempt executive, administrative, or professional employee.
Employees who are engaged in computer and outside sales occupations cannot qualify for the highly-compensated-employee exemption.
__________________________________________________________________________________
Alerts
Leave of Absence Benefits for Organ/Bone Marrow Donors
Effective January 1st, private employers must allow employees to take paid leaves of absence for organ and bone marrow donation. With the new law, employers may not interfere with employees taking donation leave, and must allow them to return to the same, or an equivalent, job. It also prohibits retaliation by the company for the employee taking donor leave. It is a good idea to review your handbook policies and leave of absence procedures.
__________________________________________________________________________________
Did You Know
Effective January 1st a number of states, and some cities, have new minimum wage rates. A few highlights: Arizona ($7.35); San Francisco ($9.79); Colorado ($7.36); Montana ($7.35); Ohio ($7.40); Oregon ($8.50); Vermont ($8.15); Washington ($8.67). A full recap http://ow.ly/3vt1z
__________________________________________________________________________________
Site To See
www.rentagreenbox.comWe have all been faced with the mountain of empty boxes after a move. Sure we might be able to return them, but they are still made of cardboard and have an extremely limited lifespan. Rentagreenbox.com uses recycled materials to make sturdy, reusable, moving boxes of various sizes. And, they are less expensive than using cardboard.
__________________________________________________________________________________
The Reading Corner
Michael Port
Book Yourself Solid
Although this book as been around a while, it is still one of the best step by step marketing books I have read.
