Free certificate of recognition

Q Are the rules for tracking and recording exempt employees' time different from those for nonexempt employees?

A According to the Fair Labor Standards Act (FLSA), employers must track and record the time worked by their nonexempt employees each workday and calculate the total number of hours worked in each workweek.

The FLSA does not mandate the use of time cards, time clocks or any other type of time-tracking system. Therefore, employers are free to use whatever time-recording device they desire as long as an accurate record of time worked is maintained for each nonexempt employee throughout every employer-defined workweek.

Although the employer is responsible for accurate and truthful time-keeping, employees are permitted to record their own hours during the work-week. The employer then is able to pay the employee correctly for all time actually worked, including overtime.

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For exempt employees, the recording of "hours worked" is a separate matter. Exempt employees, of course, are paid on a salary basis rather than an hourly basis and, because of various qualifying factors, are exempt from receiving overtime pay for all hours worked over 40 in a defined workweek.

Nonetheless, for help in administering payroll and benefits, employers may choose to create a tracking system that is designed to be applicable to their exempt employees.

Since an exempt employee's pay does not depend on the number of hours worked within a pay period and since the salary cannot be reduced because of changes in the quantitative or qualitative aspects of the job, an employer may decide to track exempt employees' days with no mention of hours.

Other employers may track time by exception. In other words, it is assumed that the exempt employee will be paid his or her regular salary unless an exception is made, such as a vacation or sick day.

In this way, an employer can accurately record when an exempt employee has worked and has used vacation or sick leave without tracking the exempt employee by the hour.

In addition, employers should be familiar with permissible as well as impermissible reasons for docking exempt employees' pay.

--BS

Q When an employee is on an international assignment, are we required to withhold social security tax from his wages? If not, how will this affect his social security retirement benefits?

A Social security is an international concept and a mandatory benefit in most countries, giving coverage to and thereby automatically taxing any worker earning income in that country.

When an employee accepts an international assignment, double taxation may occur, since most home countries require their citizens to pay social security tax on all income, regardless of where the income was earned.

To lift this burden from employees and from employers whose policy is to equalize the taxes paid by their expatriates, the United States has entered into bilateral international social security agreements with 20 countries. These "totalization agreements," as they're called, allow for an exemption of the social security tax in either the home country or the host country for defined periods of time. (For details, visit www.ssa.gov/international.)

Countries that have totalization agreements with the United States generally recognize two possible rules for establishing which country will collect the social security tax and apply those work credits to that country's retirement plan.

The Territorial Rule, recognized by all 20 countries, typically allows the worker to be subject only to the taxes of the country in which the work is actually performed. This rule applies automatically unless an application by the employer is made under the second possible rule--the Detached Worker Rule, which allows a worker on a more temporary assignment to be subject to only his home-country tax. (The Detached Worker Rule does not apply in Italy.)

Under the rules of most countries, a worker who is ready to retire and wants to receive social security benefits is required to have paid into a given country's social security system for a minimum number of years.

But a worker who has spent a large portion of his or her working years in another country might not meet the minimum requirements of his country's system or those of the other country to which he made social security contributions.

Therefore, the agreements also "totalize" the employee's working years by combining all years worked in agreement countries and using that total to help meet any country's minimum requirements.

--SL

Q How does an employee-of-the-month program work? What are the pros and cons?

A The employer establishes an employee-of-the-month program by developing a policy and communicating it to all employees.

Typically, employees nominate fellow workers for such recognition, often by submitting a form designed for that purpose.

Nominations are reviewed by a committee consisting of both managers and nonmanagement employees, and an employee is selected on the basis of established criteria.

In announcing the recognition to the employee and the entire staff, some employers post the employee's name on a publicly viewable roster of previous employees of the month.

Typically, those who are chosen as employees of the month receive a plaque or a certificate, or a special perk such as use of a designated premium parking space for a month.

In addition, at the end of the year, all of the selected employees may be considered for an annual recognition of employee of the year.

At the outset, an employee-of-the-month program usually generates excitement and interest, and it may also improve motivation, morale and initiative.

Over time, however, the enthusiasm can fade. Another potential drawback is that if the nominating and selection criteria are unclear, employees may be selected because of their personality rather than outstanding performance and good working relationships.

And in a small company the award may go to so many employees over the years that it ceases to be considered a unique recognition.

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--DL

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Online Resources

For additional questions and answers, see the online version of HR Solutions at www.shrm.org/hrnews.

BILL SCHAEFER, PHR, SHARI LAU, SPHR, GPHR, AND DIANE LACY, SPHR, ARE INFORMATION SPECIALISTS IN SHRM'S INFORMATION CENTER.