Adding personnel is typically a good indicator of growth for a new or emerging business. However, despite good intentions or attempts to achieve greater efficiency, many new businesses make common mistakes like the ones listed below when it comes to how they pay and classify their employees that can put them at risk for wage and hour lawsuits and hefty penalties.
1. Paying everyone a salary
Why we do this
Many new businesses make this top mistake with the best of intentions/motives. For one, they want to make a statement that “everyone is important” and (mistakenly) believe that "paying everyone a salary” sends this message within the organization. Some other reasons many new businesses make this #1 mistake is that they do not want to “bother people” with having to clock in and out or take the time to research and purchase timekeeping software or a “timecard system” that they believe could make their new business look/feel like “something out of The Flintstones.” (Please feel free to Google “The Flintstones” reference. )
Why we shouldn’t
The fact is, under federal wage and hour law (the Fair Labor Standards Act), “everyone is NOT the same.” Only 5 groups of employees actually can be paid a set salary regardless of how many hours they work –
(1) executives (defined by the law as those who spend the majority of their working time supervising at least 2 other employees);
(2) professionals (defined by the law as those who have and are using a professional degree or other...
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