If you own a business in Michigan, it is important that you follow the state’s payroll regulations. In 2024, the minimum wage in Michigan is $10.33 per hour. When you calculate employees’ payments, make sure you take the minimum wage into account. There are also some rules about paying overtime and managing tips that can make the process complex.
As payroll laws may change from time to time, it is easy for businesses to make errors that may cause financial and legal setbacks. The Fair Labor Standards Act (FLSA) requires employers to pay overtime at 1.5 times the employee’s regular rate when they work more than 40 hours a week. Some employees, like those in executive or professional roles, are exempt from this rule.
Common payroll errors include miscalculating overtime, failing to keep accurate time records, etc. There are different laws for different kinds of workers. Failing to comply with these rules can result in fines and penalties under Michigan’s Payment of Wages and Fringe Benefits Act. This is why it becomes important to work with an expert for payroll services in Troy, MI.
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Common payroll mistakes in Michigan
Misclassifying employees.
One of the most common mistakes Michigan businesses make is misclassifying employees. The Fair Labor Standards Act (FLSA) has different laws for exempt and nonexempt employees. In Michigan, non-exempt employees have the right to get 1.5 times higher pay if they work more than 40 hours a week. Misclassifying can result in back pay, penalties, and fines.
Miscalculating overtime.
Miscalculating overtime is another common error that can have legal consequences. As already stated, non-exempt employees must receive higher pay beyond 40 hours of work in a single week. It is not uncommon for employers to forget to factor in the different hourly rates for different tasks. Additionally, employers should know that there are specific rules for specific industries.
Missing payroll deadlines.
Paying employees on time is important for their job satisfaction. However, that is not the only important thing. Missing payroll deadlines can be a violation of Michigan’s labor laws. Employers often miss deadlines due to poor time management or having a hectic schedule. Such delays can lead to employee frustration and penalties.
This particular problem can be solved by implementing automatic payroll software. Such software usually includes deadline tracking and reminders to make sure you pay everyone on time. It can also help to create a payroll calendar with important dates highlighted.
Non-compliance with labor laws.
Employers must keep themselves updated with federal and state labor laws. These include wage, hour regulations, and benefits policies. Currently, Michigan’s minimum hourly pay rate is $10.33, and it is expected to increase to $12.05 by 2030. If you are unaware of such laws and end up paying someone less because they are not trained, you may be penalized.
Overlooking employee benefits.
Payroll includes not only the basic pay for their work but also benefits. Not accurately calculating benefits or failing to pay the benefits can lead to non-compliance with the Affordable Care Act (ACA) and other regulations. As an employer, you must track the benefits which include health insurance, retirement contributions, and paid leave.
Not engaging employees in the process.
Having transparency in the workplace fosters a culture of trust in the workplace. Your employees are more likely to be satisfied with their jobs when there is clear communication about their pay structure, benefits, and deductions. This reduces the chances of doubts or questions when you pay your employees.
Moreover, you should be willing to take any questions that they have. Encourage your employees to ask payroll-related questions.
Having a hard time doing payroll?
Payroll is complex, and so are payroll laws. Being a business owner, your primary job is to handle the business operations and not employee payments. Hire a payroll service provider in Michigan today!