Written by Kara Deyermenjian
May 21, 2018
When it comes to designing, implementing, and administering a comprehensive compensation plan, it’s not just the employer and employee(s) who must agree that the arrangement is fair. The government – both federal and state – have a seat at the table in deciding what is equitable and it’s vital to comply with applicable laws or risk facing pricey penalties.
Federal, state, and local laws and regulations all place restrictions on how employers compensate their employees, and therefore inform how an organization’s compensation program must adhere to a broad range of restrictions and standards.
The due diligence involved with staying compliant, on top of everything else HR professionals have on their plates, can be a daunting task – which is why we’ve detailed some important considerations to keep in mind before crafting a pay policy. Here are the basics:
Federal wage and hour laws, pay equity laws, and state laws all have their place in compensation practices around the United States. In the case that federal and state laws differ, the U.S. Department of Labor states that employers and employees are to follow the law that provides the highest standard of protection to employees and the strictest standard for employers.
For example, if a state or city has a $15 minimum wage while the federal minimum is under $8, an employer, in that case, would be obligated to pay the $15. However, in a state where the minimum wage is lower than what the federal government requires, an employer would be obligated to follow the federal law and pay the higher wage.
Some federal labor laws to be mindful of include:
It’s not enough for employers to fully adhere to federal laws to ensure HR compliance. They must also be mindful of state and local laws that may exceed the requirements of federal laws.
State wage and hour laws can vary from the requirements of the FLSA. Some states and localities have adopted higher minimum wages, more expansive overtime rules, and tougher rules on independent contractor misclassification and unpaid internships.
There has been an emerging trend where states have been adopting pay equity rules that exceed the requirements of federal law. These laws vary by state, but have included measures barring rules that prohibit employees from discussing their compensation, prohibiting employers from inquiring about an applicant’s salary history, and easing the standard for establishing whether two employees perform equal work.
There are many things employers can do to ensure HR compliance, here are a few suggestions to get you started:
Download our white paper and learn how organizations across the country are using market data, internal analytics, and strategic communication to establish an equitable pay structure.