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Base pay is the number-one reason employees join and stay with employers, a recent study by Towers Watson reports. Clearly, “How much should I pay my employees?” is one of the most important questions any small business owner can ask. Here are 5 steps to paying employees appropriately while staying within your operating budget.
– For nonexempt employees, overtime pay at a minimum of one and one-half times the regular rate of pay is required after 40 hours of work in one workweek. The Department of Labor’s Wage and Hours division has tools you can use to calculate hours worked and overtime. (Some states, notably California, require overtime to kick in at more than 8 hours worked in a day).
– If you want to pay employees, such as employees making craft items or garments, on a piece-rate basis, you can do so as long as the piece rate is at least equal to the minimum hourly wage rate (and overtime, if employees work more than 40 hours per workweek).
– If your employees regularly collect more than $30 a month in tips, such as bartenders, waitresses or hairdressers, you can count tips as part of their wages, but you have to pay a wage of at least $2.13 per hour and meet some other requirements in order claim a tip credit. (See this fact sheet for more information.)
5. Don’t forget the fringe—fringe benefits, that is. If you offer employee benefits such as health insurance, life insurance or a retirement plan, take the costs of providing these benefits into account. Their cost can equal 20 or 30 percent of an employee’s salary or wages.
“How much should I pay my employees?” is a question without a simple answer. Do your research and, if you have any questions or concerns, run your plans by an accountant and attorney familiar with tax issues and employment laws.
(Disclosure: GrowBizMedia writes occasional blogs for Glassdoor.)