Your employees are your company’s greatest asset. It sounds like a corny cliche, but the matter of fact is that your business won’t be able to thrive and grow unless you have managed to attract and retain top talent. And to do that, you yourself need to be a great employer.
Being a great employer means a lot of things, but one of the most important is compensating your workforce properly and fairly. Although the size of a paycheck isn’t among the top reasons why employees quit, it goes without saying that if they’re not satisfied with the way you treat and compensate them, they will look for another job.
But, making sure you pay your employees properly can be challenging, especially when we’re talking about remote and field employees.
Here are some things to consider.
Different Types of Compensation
Before we start discussing the main topic and offer you tips about how to properly pay an employee, it would be a good idea to talk about different types of compensation.
1. Hourly compensation
Employees who work on an hourly basis receive hourly compensation, which means that they’re paid based on how much time they spent working.
This kind of compensation is suitable when an employee doesn’t have a consistent working schedule or when you don’t need a full-time position. Such an arrangement can be a great option before your business takes off since it allows you to figure out how many employees you need and how you need their services.
It’s worth mentioning that hourly workers are non-exempt, meaning that according to the Fair Labor Standards Act (FLSA), they’re eligible for overtime pay. If you don’t comply with those regulations, you risk costly lawsuits and penalties.
2. Fixed salary
Salaried employees have an annual salary, and they receive a fixed amount on their payday.
The roles suitable for this kind of compensation are usually corporate positions as in that case, employees’ time input usually can be predicted.
Your employees who get a regular salary are exempt, which means they don’t qualify for overtime pay.
3. Commission-based compensation
Employees who work on commission are paid a predefined sum of money after they complete a certain task. Commission-based compensation is common in the fields such as marketing and sales, where employees’ performance is the main factor taken into consideration.
Some positions offer a base salary plus a percentage of sales closed, while in other cases, employees earn their entire paycheck based on how much they sell.
In order to make sure you pay employees on commission properly, check out the FLSA.
The Importance of Proper Compensation in the Workplace
As a business owner, you have a difficult decision to make which is "how much you should pay employees?"
Your main goal is to maximize profits and minimize all costs. But, since the performance and quality of your workforce are in direct correlation with your bottom line, maybe you shouldn’t think of your employees’ compensation as an expense but an investment.
Let’s discuss some of the reasons why compensating your employees properly matters big time.
1. It’s easier to attract and retain top talent
Exceptional workers and best performers can choose where they want to work, and if you want to be their top choice, you need to offer decent pay, among other things. Don’t forget that they know what their worth is and don’t try to bargain with them.
Given that 75% of candidates research the company they apply to, and if your reputation as an employer is nothing to write home about, you can be sure that top talent will skip your ad.
If you offer a decent salary and a benefits package, you can be sure you won’t have to scrape the barrel when hiring, and that means you will be able to expect remarkable results.
2. Motivating employees
By not compensating your employees properly, you show that you don’t value them as professionals and human beings.
Recognition plays an important role when it comes to motivating your workers. According to stats, 69% of people say they would work harder if their efforts were better appreciated.
It’s very simple: if you want to motivate your employees to do their best and deliver while at work, then incentivize them. A decent salary, bonuses, and a generous compensation plan will surely get them to go out of their way to meet company goals.
3. Boost employee loyalty
Keeping your most skilled and hard-working employees should be your priority because the average cost of filling an open position is $4,129 and it takes 42 days. And this is without the onboarding expenses and getting your new hire up to speed.
The harsh reality is that the annual turnover rate in 2020 was 57.3% and in order to lower this number, employers should work on boosting employee loyalty.
A happy and satisfied employee is loyal to the company and doesn’t look for an opportunity to leave and find a better job. So, it’s only logical that employers who compensate employees properly will have a loyal workforce and a low turnover rate, which is a win-win situation.
4. Improve employee productivity
Employees who are happy with their salary and workplace environment are more productive. When an employee sees a direct correlation between their hard work and the compensation they get, it’s only logical that they will be motivated to keep on doing a great job.
In other words, employees’ sense of belonging in the workplace heavily relies on whether they’re recognized and rewarded for their contribution to the success of the company.
Besides putting in more effort while at work, the factor that contributes to increased productivity is experience. The longer an employee stays with a company, the better and more efficient they become because they gain experience and become well-versed in performing their tasks.
What to Take into Consideration
After making a case for paying your employees properly, we should address some challenges you’ll encounter while trying to do so.
There are different factors you should bear in mind when deciding on how much to pay employees and ensuring they’re working as you expect them to.
1. Underpaying leads to lawsuits
It’s your responsibility as an employer to make sure you pay every employee properly as well as give them everything they’re entitled to. Otherwise, you risk a slew of lawsuits that could drain you financially and ruin your reputation as a respectable company.
Regardless of whether you do this on purpose or by accident, wage theft is a serious crime when an employer intentionally fails to compensate employees properly. According to the Economic Policy Institute, wage theft in the US amounts to $15 billion a year.
To avoid expensive lawsuits, hefty fines, and a tarnished business reputation, keep your payroll in check.
Even if you don’t want to deliberately underpay your employees, mistakes can happen. That’s why it’s essential to keep accurate employee timesheets, implement a time-tracking solution that integrates with your payroll software such as Timeero, and perform regular audits and checks. Being in the know regarding state regulations is also a must, as you’re obliged to keep payroll records for several years, so make them organized and easily accessible.
2. Overpaying your employees can be costly too
You most certainly don’t want to underpay your employees, not only because it will negatively affect their morale and productivity, but also because it’s illegal. However, overpaying your employees is another costly mistake that can result in various complications and financial losses.
Overpayments happen due to different reasons including administrative errors, reporting errors, late terminations, or untimely processed unpaid leaves of absence, to name just a couple of them.
As this can go unnoticed for months or even years, it’s clear that your company can be hemorrhaging money.
While it’s true that you can reclaim the overpayment by deducting it from their next salary, you should be aware that this practice can put your employee in a bind if it’s a larger amount. So, it’s a good idea to exercise flexibility and find a way to get your money back without putting the unsuspecting employee in hot water.
Needless to say, if you have field employees, the odds of such mistakes significantly increase.
To prevent overpayments, it’s best to automate your time-tracking process using Timeero, as you can easily integrate it with popular payroll and accounting apps. So, you can have an insight into how much time every field employee spent on work-related activities, approve the record, and export it to payroll software.
Since Timeero is available on both Android and iOS devices, your employees can clock in and out from any location, even if they’re offline.
In case there’s some kind of suspicious behavior such as when employees are exceeding overtime or clocking in on behalf of their co-workers, you’ll receive a notification to look into the issue.
Thanks to the face recognition feature, Timeero has put an end to buddy punching. This means that you don’t need expensive hardware or fingerprint readers to be sure that the person clocking in is the one they claim to be.
It’s even possible to clock out an employee remotely if they’re exceeding overtime.
3. Ensuring employees take breaks
Under The Fair Labor Standards Act, employers aren’t required to provide meal or coffee breaks. As this is a federal law, different states have introduced mandatory break laws.
If your state requires lunch or rest breaks, or if you choose to offer short breaks to your employees, you should be very careful about the following:
- Some states require paid breaks, so check whether this applies to your company
- If your employees have to work through their breaks, they have to be paid for that time
- In case your breaks last up to 20 minutes, they have to be paid.
However, these breaks have to be accurately tracked, because if your employees continue to work even after they have been clocked out, then this is considered the FLSA violation. Clearly communicate the break expectations to your employees and their managers to avoid hour and wage lawsuits and penalties from DOL.
Timeero allows your employees to track their lunch and rest breaks, thus ensuring you stay compliant with the FLSA, DCAA, and DOL requirements
4. Paying properly for overtime
You’re already aware that sometimes there’s a discord between federal and state labor laws. In such cases, the law that is more beneficial to the employee takes precedence.
As we’ve already mentioned, the FLSA categorizes workers as either exempt or non-exempt with the purpose of determining whether they qualify for overtime.
Non-exempt, hourly employees are entitled to at least 1.5 times their hourly wage. When it comes to weekly overtime regulations, they vary among different states. For example, in some states, the threshold is set to after 40 hours, while in Kansas, OT starts after 46 hours or after 48 hours in Minnesota.
There are also special requirements that apply to individual states, so it’s important to check this in order to avoid costly fines.
5. Monitoring field employees
It can be particularly tricky to control your on-the-go employees.
You can’t simply rely on their honesty when it comes to whether they take the shortest and most efficient route. The GPS tracking feature available in Timeero offers you an easy-to-use system for keeping track of your field employees and their trajectories while they’re at work.
Although you don’t have to pay employees for the time they spend commuting to and from work, you should have to compensate them for the travel time that’s part of their job. For example, if you’re running a plumbing business, the time an employee spends traveling to and from the customer needing a repair has to be paid.
Again, keeping track of their exact routes can save you a lot of money, so use Timeero and its GPS tracking and Geofencing features. This way, you will minimize personal use of company vehicles or taking longer routes.
How Can You Stay Compliant and Compensate Employees Properly Without Hurting Your Bottom Line?
Paying your field employees properly can be a challenging feat. Sometimes even your best intentions can lead to problems and lawsuits. Staying up to date with federal and state laws and regulations, as well as, ensuring your field employees are satisfied with their working conditions and paychecks is the best way of achieving the balance.