One thing a small business owner never wants to hear in connection with his payroll is BACK PAY. Don’t be confused, Back Pay is not when you give an employee a raise and make the start date in the past and allow for retroactive pay. No, Back Pay is a remedy for wage violations. It’s an order that the employer make up the difference between what the employee was paid and what the employee should have been paid. It’s a serious situation.
It is a federal order under the Fair Labor Standards Act (FSLA) and the small business owner must comply in accordance with the Act. According to the Department of Labor, there are four methods used:
- The Wage and Hour Division may supervise payment of back wages.
- The Secretary of Labor may bring suit for back wages and an equal amount as liquidated damages.
- An employee may file a private suit for back pay and an equal amount as liquidated damages, plus attorney’s fees and court costs.
- The Secretary of Labor may obtain an injunction to restrain any person from violating the FLSA, including the unlawful withholding of proper minimum wage and overtime pay.
An order comes in the case of an employee making a claim against an employer. Depending on the situation, there is a two- or three-year statute of limitations on claims. The FLSA is not the only Act that is used to regulate employee wages. Claims for underpayments can be available under the Davis-Bacon and Related Acts and the Service Contract Act. The laws are enforced and administered by the Wage and Hour Division.
Payroll, and the corresponding payroll taxes, is not an area in which small business owners can afford to be inaccurate or untimely. That is why so many small business owners outsource payroll to an experienced and reliable payroll provider. They understand that their expertise might not cover this very critical element of their business – and they don’t want to take chances.
Contact the owner of The Payroll Department, Teresa Ray, at 317-852-2568 in Brownsburg, or at 317-800-01941 in Zionsville, to find out more about reliable payroll services.
-Elaine of The Payroll Department Blog Team