Crime And A Half

At A Minimum

For now, federal minimum wage laws mandate that adults must receive at least $5.15 per hour. Full-time students ages 20 and under working part-time or summer jobs may be paid the youth rate of at least $4.75 per hour but only for the first 90 days of their employment. And you need certificates from the Department of Labor's Wage and Hour Division to pay the $4.75 rate.

When employees work on piece rate, commission, flat fee or salary, determine the hourly wage by dividing the total straight-time income for the week by the number of hours worked. Make sure the hourly figure at least equals the minimum wage. Be especially careful if the employee is paid solely on commission. You're required to make sure the total hours worked, divided by the commission income, doesn't fall below the minimum wage. If it does, you have to make up the difference. You can't later recover the money from weeks when commissions exceed the minimum wage.

Here's a notable exception: If you run a restaurant and your servers receive more than $30 each per month in tips, the law allows you to pay a cash wage of only $2.13 per hour. However, if the cash wage plus tips doesn't equal the minimum wage, you're expected to make up the difference. Make sure employees understand the arrangement and that they're allowed to keep any tips they receive.

The FLSA specifies when you may and may not make payroll deductions that would reduce wages below the legal minimum. Among deductions not allowed to push wages below the minimum are disciplinary fines for poor work or violating rules, repayment of cash register shortages, reimbursement for damage to the employer's property, the cost of uniforms, and the cost of required physical exams. It's OK to deduct taxes; reasonable cost of board and lodging; savings plans requested by the employee; wage attachments, such as court-ordered support payments; and repayment of cash advances, even if the deduction reduces wages below the minimum.

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This article was originally published in the February 2001 print edition of Entrepreneur with the headline: Crime And A Half.

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