California's wage-and-hour laws contain extensive rules relating to how employees are paid.
Pay issues come into play even before you hire an employee. How will the employee be classified? What is the employee's rate of pay?
Consider these first steps.
How your employees are paid will depend on whether they are classified as exempt or nonexempt. Use the Exempt/Nonexempt Wizard to assist you with this determination. Determine also if the employee is full time, part time, or temporary.
Decide on a pay rate for each employee (hourly, daily, weekly, piece rate or commission). Remember that in addition to the state
minimum wage, local ordinances may also set a minimum wage. Check
local ordinances in locations where you conduct business or have employees to determine whether a local minimum wage rate applies.
If you have classified the position as exempt, double-check to make sure the employee meets the minimum salary requirements for the particular exemption.
Check any requirements particular to employees in a specific industry.
Ensure that you comply with California's Fair Pay Act, which prohibits you from paying any of your employees an amount less than employees of the opposite sex or of different races or ethnicities for "substantially similar work."
Establish and document the employees' work schedule. Review the wage order(s) that applies to the employees. Certain wage orders set maximum hours of work or mandatory days off.
Clearly define the schedule's "workdays" and "workweeks" in the documentation. The definition you use will affect your obligations to pay overtime to your employees.
Nonexempt employees must be provided with specific wage information at the time of hire. The Labor Commissioner has designed a template that complies with the specific requirements, and includes information regarding rate of pay, paydays, mandatory paid sick leave and mandatory employer information.
Use the Wage and Employment Notice to Employees (Labor Code section 2810.5) to comply with this law.
You must also notify employees, in writing, of any changes to wage information, within seven calendar days after the time a change was made, except in certain specific circumstances.
Once you have hired employees, you will need to take certain steps to make sure you meet the legal requirements surrounding pay.
Calculate the amount the employee is to be paid, adding up all wages earned (regular and overtime) and including all other compensation due (such as tips, commissions, or, in the case of a final paycheck, accrued vacation or PTO). This results in the gross amount you owe the employee.
California law creates daily and weekly overtime requirements for nonexempt employees in the private sector. Calculating overtime pay can be tricky. Basic steps include: identifying the hours that you must pay on an overtime basis; deciding what overtime rate must be applied; and determining the regular rate to which overtime must be applied. Use the Overtime Calculation Worksheet to assist you.
If you have piece rate employees, make certain you comply with the specific pay rules that apply to these types of workers.
Make mandatory and permitted deductions from the gross amount of an employee's compensation for taxes, benefits, garnishments, etc.; this results in the net amount owed.
You must pay the correct wages to your employees, and you must pay them on time and in the manner required by law. Establish a pay schedule that complies with the law. Different rules apply for paying employees on regular paydays and for final pay when employees resign, retire, are laid off or are terminated.
Create a paycheck for the net amount and deliver it to the employee according to your established payday schedule. You can offer direct deposit, but you may not force employees to use it. When you pay employees, you must provide each employee an itemized statement of wage deductions (commonly referred to as a pay stub), in writing, that contains specific information.
Keep records of everything related to compensation. Payroll records, itemized wage statements and records of hours worked must be maintained by the employer for set time periods.
