Could You Go To Jail Over Your Pay Practices?

by | Apr 30, 2012 | Blog, Compensation Planning

  • Amy Letke

    Amy Newbanks Letke, SPHR, GPHR, is the Founder of Integrity HR, Inc. Amy provides workplace solutions to improve performance, reduce liability and increase profits. She is passionate about helping other entrepreneurs and business owners achieve success. Contact us for more insights - 502-753-0970 or

Could You Go To Jail Over Your Pay Practices?
The Secrets to Successful Salary & Benefits Practices

When is the last time you really thought about the compensation philosophy in your organization? Six months? A year? Two years? YIKES!

There are laws that govern how your employees are paid—do you know what they are and whether or not your organization is at risk?

For example: If you are misclassifying job functions as exempt when they are non-exempt you could be headed for a world of hurt if your employees figure it out. You could be liable for unpaid overtime for every employee who is misclassified. Ouch! Could you pay those fines? Or could you go to jail over your pay practices?

If you even have to think about that for a second, then you need to keep reading. Even if you think you are in the clear, you may be wrong.

There are other reasons to look at your compensation plan—a properly administered compensation strategy can not only reduce payroll costs, but can also dramatically increase the productivity of a workplace, enhance the company culture, and overall increase the company bottom line.

Have you ever sat down to think about why you pay your employees the amount that is on their check each pay period? Are you above or below industry standards? Are you paying based on performance or do you pay everyone the same? Are you discriminating without knowing about it? Are your wages fair? Do you take into account the benefits that you are offering your employees as part of their compensation?

Confused? It’s a good thing you found this article then. You could be setting your company up for failure.

The Secrets to Successful Salary & Benefits Practices

Many companies overlook salary and benefits because they are not considered the “most” important aspect of a job. It is crucial to recognize that the salary and benefits your organization offers serve a major role in recruiting, retaining and motivating staff.

Providing the right amount of employee benefits is one of the secrets to keeping employees on the job even when there are higher-paying job opportunities. Alternatively, employees who are paid very well leave jobs because the benefits are limited or perceived as “not competitive.”

Desirable benefits include: health care, eye care, dental care, sick leave, retirement plans as well as vacation time and flexibility in one’s schedule. As times change and newer generations join the workforce, benefits are being looked at more carefully. One strategy to address this issue is to survey employees frequently concerning “needs and wants” for benefits which can help an employer allocate resources equitably and more affordably.

Similar to employee benefits, the quest to compensate employees fairly is an ongoing challenge. If your organization pays employees too little, you may risk alienating and losing valuable employees. If you pay too much, you may be unwisely spending company resources.

Might it make more sense for your organization to lower base wages and increase performance incentives?

You may think it’s silly to do something like pay above industry standards to your staff, but how much an organization can afford for employee salaries can play a significant role in the caliber of talent you attract to your organization.

Another important secret to remember is if your compensation strategy is consistent with the Fair Labor Standards Act? Have you correctly identified the exemption status of the job functions within your organization? Are your managers educated as to what they can and can’t do when it comes to allowing time off, etc?

Remember, the key is balance when evaluating pay and benefits in an organization. Both play a very important role in successfully attracting and retaining staff, and serve to define your organization’s culture and image in a community.

If you’re not doing your compensation correctly, you may be sending the wrong messages to your employees without even knowing it. You may be setting your company up for failure. You may be on your way to jail!


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