After studying this chapter, students should be able to:

2–1 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

CHAPTER 2

Learning Objectives

After studying this chapter, students should be able to:

• Explain the major provisions of the Fair Labor Standards Act.
• Define hours worked.
• Describe the main types of records used to collect payroll data.
• Calculate regular and overtime pay.
• Identify distinctive compensation plans.

Contents

Chapter 2 outline:

LEARNING OBJECTIVES

THE FAIR LABOR STANDARDS ACT

Coverage Enterprise Coverage Individual Employee Coverage Employer Employee Employees of a Corporation Partnerships Domestics Statutory Employees Statutory Nonemployees Interns Wages The Minimum Wage Paying Less than the Minimum Wage Paying More than the Minimum wage State Laws Paying a “Living Wage” Tips Workweek Overtime Hours and Overtime Pay Exceptions to Overtime Hours and Overtime Pay Provisions Compensatory Time Off

Payroll Accounting 2015 25th Edition Bieg Solutions Manual Visit TestBankDeal.com to get complete for all chapters

2–2 Payroll Accounting © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Exemptions from FLSA Requirements White-Collar Workers Test of Exemption Salary Basis Blue-Collar Workers Equal Pay Act Child-Labor Restrictions Nonfarm Occupations Agricultural Occupations Certificate of Age Penalties Areas Not Covered by the FLSA

DETERMINING EMPLOYEE’S WORK TIME

Principal Activities Clothes-Changing Time and Wash-Up Travel Time Idle Time Waiting Time Rest Periods and Coffee Breaks Meal Periods Taking Work Home Sleep Time Training Sessions Doctor’s Appointments Preliminary and Postliminary Activities Fractional Parts of an Hour Absences Tardiness

RECORDS USED FOR TIMEKEEPING

Time Sheets Time Cards Computerized Time and Attendance Recording Systems Next Generation Touch-Screen Technology Internet Biometrics IVR

METHODS OF COMPUTIN G WAGES AND SALARIES

Time Rate Calculating Overtime Pay

Chapter 2 2–3 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Converting Weekly Wage Rates to Hourly Rates Converting Biweekly Wage Rates to Hourly Rates Converting Monthly Salary Rates to Hourly Rates Converting Semimonthly Salary Rates to Hourly Rates Salaried Nonexempt Employees Salaried with Fluctuating Workweek BELO Plan Piece Rate Overtime Earnings for Pieceworkers—Method A Overtime Earnings for Pieceworkers—Method B Special Incentive Plans Commissions Nondiscretionary Bonuses Profit-Sharing Plans

KEY TERMS

KEY POINTS SUMMARY

Matching Quiz (p. 2–31)

• D
• G
• F
• E
• H
• C
• J
• B
• I
• A

Questions for Review (p. 2–31)

• The two bases of coverage provided by the FLSA are enterprise coverage and in-

dividual employee coverage. Under enterprise coverage, all the employees of an enterprise are covered if the enterprise has at least two employees who engage in interstate commerce or produce goods for interstate commerce and if the enterprise has annual gross sales of at least $500,000.Under individual employee coverage, the FLSA covers a worker if the employee either engages in interstate commerce or produces goods for such commerce. Em- ployment in a fringe occupation closely related and directly essential to the production of goods for interstate commerce constitutes engagement in the production of goods for interstate commerce.

• The IRS groups the items of evidence into behavioral control, financial control, and

the relationship of the parties.

• Retail or service establishments, farms, and institutions of higher education may

employ full-time students at 85 percent of the minimum wage.

• The living wage in Miami is $12.23 per hour (if the employer provides health

insurance) or $14.01 per hour without insurance.

2–4 Payroll Accounting © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

• A tipped employee engages in an occupation in which tips of more than $30 a

month are customarily and regularly received. An employer can credit up to $5.12 of a tipped employee’s minimum wage as coming from tips actually received.

• State employees working in the area of public safety may accumulate compensatory

time off up to 480 hours. (The 480-hour limit represents 320 hours of overtime actually worked at the one and one-half overtime rate.) The employees may “bank” their hours and use them later as time off at time and one-half during the course of their employment.

• An employee would be paid for compensatory time off in the following two cases:

(1) At termination of employment.(2) Upon reaching the “bank” maximum of 480 or 240 hours.

• The following employees are exempt from some of the requirements of the FLSA:
• Amusement park employees are exempt from the minimum wage, equal pay,

and overtime provisions.

• Taxicab drivers are exempt from only the overtime provision.
• Casual baby sitters are exempt from the minimum wage, equal pay, and over-

time provisions.

• Elementary school teachers are exempt from the minimum wage and overtime

provisions.

• Outside salespersons are exempt from the minimum wage and overtime provi-

sions.

• The types of exempt white-collar employees are executives, administrators, profes-

sionals, highly compensated employees, computer professionals, creative profession- als, and outside salespersons.

10. To be classified as a highly compensated employee, he or she must:

(1) Earn $100,000 or more.(2) Perform nonmanual work.

(3) Regularly perform one of the exempt duties of an executive, administrator, or professional employee.

11. The following conditions must be met:

(1) All work must be performed outside school hours.(2) There is a maximum 3-hour day and 18-hour week when school is in session (8 and 40, respectively, when not in session).(3) Work must be performed between 7 A.M. and 7 P.M. (9 P.M. in summer).

• The principal activities of employees are those they must perform and include any

work of consequence performed for the employer. Principal activities include those that are indispensable to the performance of productive work and those that are an integral part of a principal activity.

• The time spent by employees in traveling to and from work counts as time worked

only if contract, custom, or practice so requires. In some instances, however, travel time between home and work counts as time worked. For example, when an