5 Simple Steps Clients Can Take to Boost Workers' Financial Wellness

Are you trying to help your employees increase their financial well-being? Check out these 5 great tips from Employee Benefits Adviser on how to help increase your employees' investment into their financial wellness by Joe Desilva.

Now more than ever, employers offer a wide array of benefits to build engagement and culture within their walls. Healthy snack options adorning the kitchen? Check. Fitness stipends? Check. Competitive work-from-home policies? Check. These are all nice-to-have extras, but employees are increasingly concerned about a more fundamental concern: retirement planning. And it’s here where employers are not providing enough enticing options as they are with the other, flashier perks.

One of the biggest issues employees face as they plan for retirement is economic uncertainty. Only 21% of workers are very confident that they will have enough money for a comfortable retirement, according to the 2016 Employee Benefit Research Institute Retirement Confidence Survey. This should matter to employers because financial uncertainty can have a negative effect on work performance, according to a study by Lockton Retirement Services. The study found that one in five workers reported feeling extremely stressed, mostly because of their job or finances, and those reporting high stress were twice as likely to report poor health overall, leading to more sick days and decreased productivity.

Boosting financial wellness programs not only can help employees’ finances in the long term, it can possibly help employees manage stress and increase productivity in the short term. Employers seem to understand this. In fact, 92% of employer-respondents in a study commissioned by ADP titled Winning with Wellness confirmed interest in providing their workforce with information about retirement planning basics, and 84% said the same of retirement income planning.

Yet, even though many employers appreciate the value of these programs, 32% are not considering implementation. The appetite exists for retirement planning, but the prospects of starting a program appear to be daunting. The truth is, it can be easier than you think.

Here are five simple steps an employer can take to start helping employees find tools and information to help them better manage their finances and grow more confident in their financial futures.

  1. Teach employees critical planning skills. Experts suggest retirees will need 75%-90% of their working income to live comfortably in retirement. To help employees determine the optimal amount to meet their needs, consider providing them with tools that look at factors such as current annual pre-tax income, estimated Social Security benefit amount, current age and the age they would like to retire, and any retirement savings and project possible retirement savings outcomes. Helping them estimate savings needs and retirement investing now can pay off in the future.
  2. Offer access to automatic enrollment and auto-escalation features. No matter how well employees do with other investments, the 401(k)’s advantages of tax-deferred growth and a company match is likely unbeatable. By automatically enrolling employees in retirement plans with savings increases, you may be able to position your employees for a more confident financial future.
  3. Provide resources so employees can seek investment advice from a professional. Employees may want to seek advice on their investments so they will not bear the stress of retirement on their own. There are a lot of options available to employees, but they may not be familiar enough with those options to determine whether or not they’d benefit. Providing access to professional investment advice with respect to retirement accounts may help employees feel confident in their retirement decisions.
  4. Deliver tools and personalized materials that integrate with real data. Working with a service provider that integrates payroll and recordkeeping data can give a retirement plan the ability to deliver targeted personalized information that employees can use for planning purposes. By delivering relevant information, employees can get engaged and have a better sense of the progress of their retirement planning.
  5. Make self-learning tools available for honing financial skills anytime, anywhere. A financial wellness program can help employees face their financial decisions with confidence. Most programs offer a library of tools and resources that gives employees access to information about planning, saving, and providing for their home, family and retirement. With financial education, employees may make better financial choices and set realistic goals.

At a time when employee retention is crucial, it’s important to create a support system for employees as they plan their financial futures. With so many workers concerned about retirement security, employers have a clear opportunity to step in and help. Whether it’s enabling employees to save more for retirement or learn about budgeting, financial planning can potentially serve as another popular perk among that list of nice-to-haves.

See the original article Here.

Source:

Desilva J. (2017 March 16). 5 simple steps clients can take to boost workers' financial wellness[Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/5-simple-steps-clients-can-take-to-boost-workers-financial-wellness


Expert: The staggering new retirement savings number millennials have to hit

Have your millennial workers started saving for retirement? If not take a look at this great article from HR Morning about the amount of money millennials need to save for retirement by Christian Schappel.

Want to jolt your younger workers into contributing more to your company-sponsored retirement plans? Just show them this figure. 

After looking at several studies, estimates and financial experts’ opinions, Robert Powell, USA Today’s retirement planning expert and editor of Retirement Weekly, is predicting that millennials will need upwards of $2.5 million saved to comfortably retire.

That estimate is for the youngest millennials — those born in the late 1990s.

The news isn’t quite as bleak for those born in the 1980s. Their retirement savings goal, according to Powell: $1.8M.

Why so much?

Here are the numbers behind the estimates.

Powell’s assuming millennials will need to live on between $30K and $40K annually in retirement (in today’s dollars).

Plus, a modest rate of inflation (2%) will make $1M of today’s dollars worth about $530K in 32 years, and roughly just $386K in 48 years.

You can see Powell’s breakdown in more detail here.

The bottom line is this: For today’s millennials to hit that $2.5M number in 48 years, Powell said they’d need to save about $1,000 per month — and that’s assuming there’s 5% growth on their investments annually. That’s a staggering amount that, most likely, your employees aren’t coming close to hitting.

Still, every little bit helps. And if these figures can encourage employees to increase their savings even a little, they’ve done their job.

See the original article Here.

Source:

Schappel C. (2017 February 23). Expert: the staggering new retirement savings number millennials have to hit [Web blog post]. Retrieved from address http://www.hrmorning.com/expert-the-staggering-new-retirement-savings-number-millennials-have-to-hit/


Debt should be priority in financial wellness programs

Do you know what your employees prioritize in their financial wellness program? Take a look at this article from Employee Benefits News about how more employees are placing debt as their number one priority in their financial wellness plans by Kathryn Mayer.

As research continues to pile up about employees’ dire financial state, many employers are left wondering how best to help their workers become financially stable.

Step one? Help them get rid of debt.

“Debt is the biggest [financial well-being] issue right now,” Meghan Murphy, director of thought leadership at Fidelity Investments, said Tuesday during the NAPA 401k Summit in Las Vegas. “Debt is becoming a way of life for all generations.”

There’s a “huge focus” for employers to take action right now in helping employees pay down student loans, Murphy said. It’s an issue plaguing everyone from millennials entering the workforce with massive amounts of debt to baby boomers who have their own student loans and are looking to finance their children’s education as well.

“Not only is [student loan repayment] great for retention, but it makes employees feel great,” she said.

Though student loan debt is garnering more attention in the workforce, it should not be the only area of focus, she said. Credit card debt, 401(k) loans and mortgage loans should also be priorities. In particular, many employers are beginning to put plans in place for ways to manage 401(k) loans by limiting the number of loans allowed or putting a waiting period in place for employees to get the money. “People are very attached to the concept that they can have the money if needed, but we have to find a way to stop that.

“A lot of education is needed in the workplace with debt — student loan debt, credit card debt … there’s not a single focus. If [employees] can pay down debt in general, [they] can save more. Even if employees can save a little bit, with whatever tools we can build and whatever tools and engagement employers offer, that would go a long way.”

Emergency savings also should be a big area of focus for financial wellness,” Murphy said. According to Fidelity’s research, employees do not think long term when it comes to financial goals; 27% of employees only think about the next few months when it comes to money. People who lack emergency savings are twice as likely to say they do not feel good about their finances, Murphy added.

“Most people don’t have an emergency savings account, and most people who do are afraid to spend it,” she said.

What the industry should do — and is starting to do — is to come up with ways to automate emergency savings, similar to automating retirement accounts savings.

Overall, employees’ financial state is pretty dire, Murphy said, citing Fidelity Investment research. In addition to meager savings, financial stress is wreaking havoc in the workplace. More than half of millennials say they’re less committed to work when experiencing money problems, and 28% say they are distracted at work because of it. Another 24% of workers say they avoid medical treatment due to financial problems.

“It’s all very cyclical,” Murphy said. “If you have a health issue, it can impact your money; it can impact your job. If you have a money issue, it can impact your health; it can impact your job. And it all impacts our happiness.”

The overall takeaway is financial wellness is needed in a big way.

“Employees really, really want help to make financial decisions and employers are starting to step up to take this role,” she said.

See the original article Here.

Source:

Mayer K. (2017 March 21). Debt should be priority in financial wellness programs [Web blog post]. Retrieved from address https://www.benefitnews.com/news/debt-should-be-priority-in-financial-wellness-programs?tag=00000151-16d0-def7-a1db-97f03c840000


Financial stress hurts emotional, physical well-being of workers

Did you know that your emotional and physical well-being can take a hit when you are under financial stress?  Here is an interesting article from Employee Benefits Advisors about the correlation between financial stress and mental and physical health by Amanda Eisenberg.

Americans aren’t able to save for their financial goals, and that stress is affecting their emotional and physical well-being.

A new study by Guardian Life Insurance found that financial outlook is the most significant driver of working Americans’ overall well-being, constituting 40% of the insurance company’s Workforce Well-Being Index, and money is cited as the No. 1 source of stress for a majority of workers.

“Even among people working full-time with benefits, many still do not have access to adequate insurance coverage or retirement plans,” says Dave Mahder, vice president and chief marketing officer of Guardian’s Group and Worksite Markets business. “And few take advantage of the health and wellness programs available through their employers, which often contain a much broader menu of resources than workers realize.”

Millennials are one of the subsets of employees who do participate in benefits that can help alleviate financial stress, the survey found.

“Millennials want marketing to them,” says Gene Lanzoni, assistant vice president of thought leadership for Guardian Life. “It’s not enough these days to say, “This is someone like you,” to do with your benefit selection. That’s what the challenge is for millennials. It’s not enough of an engaging process for them.”

Half of millennials surveyed in Guardian Life’s “Fourth Annual Guardian Workplace Benefits Study” said they don’t have disability insurance, while a third have yet to sign up for a retirement plan.

They are not the only group of employees struggling to purchase voluntary benefits like disability and life insurance; single working parents are also feeling the heat.

One in three single working parents does not have a retirement plan, compared to 20% of the 1,439 workers surveyed. Similarly, one in four workers doesn’t have life insurance, and one in three workers doesn’t have disability insurance, according to the survey.

“Many of those working parents are struggling to balance work and personal life, and they may not be able to afford some of the protection products,” says Lanzoni. “Some of that discretionary income might not go toward paying a voluntary disability plan.”

To offset expenses, Americans are increasingly turning to debt, whether through loans or credit cards, to temporarily relieve their financial burdens.

Four in 10 Americans have car loans, 32% of workers are carrying a mortgage, 17% have student loans and 12% have home improvement debt, according to the study. Overall, 75% of Americans are carrying debt.

Non-mortgage debt — particularly auto and education loans — contributes to lower financial wellness; those carrying the most total debt, including mortgages and rent, report considerably lower overall well-being, according to Guardian Life’s report.

Employers can also help alleviate the burden by providing education to employees, among other services, says Lanzoni.

The survey found that employer-sponsored voluntary insurance products and college tuition or loan repayment programs help with financial wellness, as well as employee assistance programs that can identify financial, emotional and physical issues that lead to stress.

See the original article Here.

Source:

Eisenberg A. (2017 March 13). Financial stress hurts emotional, physical well-being of workers [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/news/financial-stress-hurts-emotional-physical-well-being-of-workers?feed=00000152-1387-d1cc-a5fa-7fffaf8f0000


What Your Employees Should Know About Social Security Benefits and Taxes

Great article from SHRM about the importance of educating your employees about their social security by Irene Saccoccio.

Social Security is with you throughout life’s journey, and we want to put your employees in control of their finances and future. With the tax filing deadline quickly approaching, everyone needs to make sure all their ducks are in a row before they file. Do your employees know that Social Security benefits may be taxable?

It’s true. About forty percent of people receiving Social Security benefits must pay taxes on some of these benefits, depending on the amount of their taxable income for the year. This includes all monthly retirement, survivor, and disability benefits. This may happen if your employees have other significant income in addition to their Social Security benefits.

The good news is that it’s easy to find out whether they must pay taxes on their benefits. All your employees need to look at their Social Security Benefit Statement (Form SSA-1099/1042S). An SSA-1099 is a tax form Social Security mails each year in January to people who receive Social Security benefits. It shows the total amount of benefits they received from Social Security in the previous year so they know how much Social Security income to report to IRS on their tax returns.

Your employees should automatically receive this form. If they don’t receive their Benefit Statement or misplaced it, no need to worry. A replacement SSA-1099 or SSA-1042S is typically available for the previous tax year after February 1. Even better news, Social Security has made requesting or replacing an annual Benefit Statement even easier. Now everyone has the ability to download it anytime and anywhere by using our online services.

Your employees can go to our my Social Security page, and select “Sign In or Create an Account.” Once they are logged in, they should select the “Replacement Documents” tab to obtain a replacement 1099 or 1042S benefit statement. Your employees can also use their personal my Social Security account to keep track of their earnings each year, manage their benefits, and more.

Your employees can also obtain a replacement benefit statement by calling us at 1-800-772-1213 (TTY 1-800-325-0778), or contacting their local Social Security Office. People living outside of the United States, need to contact their nearest U.S. Embassy or Consulate.

Handling tax season is all about what you know. Encourage your employees not to wait. They should open a personal my Social Security account today. In addition to getting a SSA-1099 or 1042S, there are many other tools like their Social Security Statement or benefit verification letter that can help them today. Just another way in which Social Security helps them secure today and tomorrow.

See the original article Here.

Source:

Saccoccio I. (2017 March 24). What your employees should know about social security benefits and taxes [Web blog post]. Retrieved from address https://blog.shrm.org/blog/what-your-employees-should-know-about-social-security-benefits-and-taxes


Digital approach to millennials can boost retirement savings participation

Do you need help boosting involvement in your retirement program? Take a look at this great article from Benefits Pro about how digital media can be the perfect vehicle for increase enrollment in your retirement program by Marlene Satter.

Retirement plan providers need a new approach—literally—when it comes to engaging millennials: going digital.

According to a blog post from Corporate Insight, millennials use, or seek to use, technology and mobile platforms to manage as many aspects of their lives as possible. But when it comes to retirement plans, many can’t.

While millennials are not only much more likely to value mobile access to their 401(k)s than their parents are, plan providers haven’t been as enthusiastic.

A Corporate Insight survey found that 57 percent of millennials consider the ability to manage their retirement plan account via a mobile app “very important” or “extremely important,” versus just 26 percent of baby boomers, but only 10 of the 19 leading retirement plan providers Corporate Insight tracks offer any kind of transaction capabilities via their iPhone apps.q

And that, considering millennials’ preferences, is a failure.

Although it’s considerably better than it was only four years ago, when only two out of 17 firms provided such service, the post says, “the industry has yet to reach the standard set by other financial industry verticals, like banking and brokerage, where mobile transaction functionality is the new normal.”

It’s true that many retirement plan providers have recently introduced mobile apps, but those apps have only limited capabilities compared with the functionalities millennials are looking for.

Then there’s the little matter of advice and education. Thanks to the Great Recession, millennials have a low risk tolerance and tend to stick to very conservative investments.

In addition, they “highly value advice and are not receiving enough of it,” the post says. With millennials the most likely of all generations to seek some degree of professional advice, at 89 percent compared with 78 percent of boomers, only 58 percent say they have been offered this assistance.

Of course, even among those offered advice, just 59 percent have actually taken advantage of it—possibly because they perceive it as expensive and don’t realize that the plan sponsor may be footing the bill instead of the employee.

Better communicating the menu of options available to employees could correct misperceptions, as well as alert employees unaware of the option to its availability.

Millennials are also more open to managed accounts, and those who have them are likely to say they’re satisfied or very satisfied with them.

Fintech firms offering low-cost robo options could boost the participation of young people in their retirement accounts, and as a means of customization they could be key to improving the results of defined contribution retirement accounts in helping employees prepare for retirement.

See the original article Here.

Source:

Satter M. (2017 March 24). Digital approach to millennials can boost retirement savings participation [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/03/24/digital-approach-to-millennials-can-boost-retireme?ref=hp-news


Employee financial health connects to physical health

Did you know that there is a direct correlation between financial and physical health? This article from Benefits Pro is a great read explaining the link between an employee's financial and physical health by Caroline Marwitz.

LAS VEGAS -- Are poor physical health and poor financial health connected? The benefits industry is making the link, if you consider how many deals between health-related benefits companies and retirement providers have occurred lately.

Obviously, the poor, at least in America, have a more fragile state of health than the more affluent. And as we age, the potential for unplanned health events to hurt us financially increases -- and that's important for retirement advisors and plan sponsors to remember. But what about your typical employees who are neither poor nor elderly?

A study in the journal Psychological Science looked at worker attitudes and actions to find out whether poor physical health and poor financial health might be linked, and how.

The researchers studied employees who were given an employer-sponsored health exam and were told they needed to change certain behaviors to improve their health. Which employees made the changes and who blew them off?

The researchers accounted for external factors such as different levels of income and physical health, and differences in demographics. Yet the results were still startling:

“Employees who saved for the future by contributing to a 401(k) showed improvements in their abnormal blood-test results and health behaviors approximately 27% more often than noncontributors did,” the researchers concluded in Healthy, Wealthy, and Wise: Retirement Planning Predicts Employee Health Improvements.

The employees who made the behavior changes to better their physical health were also the ones who were taking action to better their financial health.

Employee attitudes about the future and how much control they have over it affect whether they take care of their physical health and their financial health. That sense of control, or conversely, that feeling of no control, and thus, no investment in long-term results, is one reason why some employees might not participate in retirement plans, and, maybe, wellness and well-being programs.

What if, along with the retirement health-care cost calculators many retirement plan providers offer, there was a fatalism calculator too? That way you could see right away each person’s sense of control or feelings of inevitability about their future and help them more efficiently.

Because if someone is more fatalistic, telling them about their 401(k) match or pension options isn’t going to make them enroll in a retirement plan. Scaring them with statistics about the high costs of health care in retirement isn’t going to do the trick either. Instead, consider the following points for such employees:

  • They can be helped to see that the future is a lot more unpredictable (and complex) than they realize, both negatively and positively.
  • They can be helped to realize that even the smallest actions they undertake can have a big impact in the long term.
  • They can be helped to understand that seemingly unobtainable goals can be broken down into steps and tackled bit by bit.

Look behind employee behavior for the unexamined biases and long-held assumptions that are causing it. If they can see that it’s not who they are that determines their future but what they do, it's a start.

See the original article Here.

Source:

Marwitz C. (2017 March 19). Employee financial health connects to physical health [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/03/19/employee-financial-health-connects-to-physical-hea?ref=hp-top-stories


The benefits of financial wellness counseling

Are your employees being properly educated on the benefits on their financial well-being? If not take a look at this article from Benefits Pro about the value of educating your employees in financial wellness by Jack Craver

Money Management International, a nonprofit credit counseling organization, is touting the results of a recent survey it conducted as evidence that employers can significantly reduce stress among their employees by offering them financial counseling resources.

MMI announced recently 86 percent of the 150 employees it provided financial counseling to at an Oregon-based nonprofit health agency say they have less stress related to money as a result of the counseling.

In addition, most of the employees at Samaritan Health Services say the counseling led to them achieving certain financial goals, such as reducing debt (60 percent), setting aside more money for retirement (38 percent), boosting their credit score (30 percent) or buying a home (8 percent).

"At MMI, we know that financial coaching, counseling, and education work, but seeing the incredible, positive impact this program has made on the financial outlook of these clients is simply amazing,” says Julie Griffith, Mapping Your Future account manager, in a statement accompanying the study’s release.

Other research has shown employers are increasingly viewing financial counseling as a key component of wellness initiatives due to the significant psychological and emotional toll money-related anxiety takes on employees.

In addition to causing depression, sleep deprivation and all sorts of health problems that reduce an employee’s productivity, financial stress often distracts employees from their work. A survey last year showed that 37 percent of U.S. employees report spending time on the job thinking about or dealing with personal finances.

The awakening to the importance of financial wellness coincides with a number of studies which shed light on young Americans’ lack of savings. One study found a solid majority of Americans have less than $500 in savings. Another found that the U.S. personal savings rate was just 5.7 percent, roughly half of what it was 50 years ago.

See the original article Here.

Source:

Craver J. (2017 March 08). The benefits of financial wellness counseling [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/03/08/the-benefits-of-financial-wellness-counseling


Why employers should rethink their benefits strategies

Has your employee benefits program grown old and stale? Take a look at the great article from Employee Benefits Advisors about the benefits of upgrading your employee benefits to match your employees needs by Chris Bruce

Historically, employee benefits have been viewed as a routine piece of the HR process. However, the mentality of employees today has shifted, especially among the growing population of millennial employees. Today’s workforce expects more from their employers than the traditional healthcare and retirement options, in terms of both specific benefit offerings and communications about those offerings.

For companies, it’s critical they address the evolving needs of their workforce. With unemployment rates plunging to their lowest levels since before the financial crisis, the search for talent is heating up, and organizations need to work harder than ever to retain top talent in a competitive job market. To do this, I see three steps that organizations need to take when rethinking their benefits strategy and engaging with employees: embrace a proactive rather than reactive benefits strategy, think digital when it comes to employee communications and consider the next generation of employee benefits as a way to differentiate from the competition.

1. Reconsider your benefits evaluation process

The benefits process at most companies is reactive — executives and HR only look to evaluate current offerings when insurance contracts expire or a problem emerges. When the evaluation does happen, the two factors that often concern employers the most are product and price. Employers often gravitate toward well-known insurers that offer the schemes that appear familiar. However, this can often lead companies to choose providers who fall short on innovation and overall customer experience for employees.

This approach needs to be flipped on its head. Companies should be proactive in determining which benefit schemes best meet the needs of their workforce. The first step is going straight to the source: talk to employees. Employers can’t know what benefits would be most appealing to their employee base unless they ask. By turning the evaluation process to employees first, companies can better tailor new benefits to meet the needs of their workers, and also identify existing benefits that might be outdated or irrelevant, therefore saving resources on wasted offerings.

Data and analytics also are playing an increasing role across the HR function, and benefits is no exception. By leveraging technology solutions that allow HR to track benefits usage and engagement, teams can better determine what is resonating with employees and where benefits can be cut back or where they should be ramped up.

2. Put down the brochure and think digital engagement

Employee education is another area of benefits that can often perplex companies. According to a recent survey from Aflac, half of employees only spend 30 minutes or less making benefit selections during the open enrollment period each year. This means employers have a short window of time to educate employees and make sure they are armed with the right information to feel confident in their benefits selection.

To do this effectively, HR needs to move past flat communication like brochures, handouts and lengthy employee packets and look for ways to meet employees where they live — online. By testing out innovations that create a rich experience, while still being simple and intuitive, employers can grab the attention of their workforce and make sure key information is communicated. For example, exploring opportunities to create cross-device experiences for employees so they can interact on-the-go, including augmented reality applications or digital interactive magazines. Additionally, for large corporations, hosting a virtual benefits fair can provide a forum for employees to ask questions in a dynamic setting.

3. Embrace the next-generation of benefits

As organizations become more savvy and nimble, personalization will have a huge impact in encouraging employee engagement and driving satisfaction among today’s increasingly diverse workforce. We have already started to see some companies embrace this new approach to benefits, adding out-of-the-box items to normal offerings — from debt consolidation services and wearable health tracking technology to genome testing and wedding concierge services.

The fact is, the days of “status-quo” benefits are gone, and employees today want benefit options that match their current life circumstances. To best engage employees, organizations need to be proactive in evaluating benefits regularly and using analytics to track usage, identify opportunities to implement digital communication elements and look for ways to introduce new benefits to meet the needs of their employee base. By following these steps, organizations can gain a competitive edge when it comes to attracting and retaining top talent.

See the original article Here.

Source:

Bruce C. (2017 March 10). Why employers should rethink their benefits strategies [Web blog post]. Retrieved from address http://www.employeebenefitadviser.com/opinion/3-steps-employers-can-take-to-rethink-benefits-strategy?feed=00000152-1377-d1cc-a5fa-7fff0c920000


Compliance Overview: FLSA – Minimum Wage Laws

Most employers and employees in the United States are subject to the minimum wage provisions set out by the Fair Labor Standards Act (FLSA).

However, the FLSA also provides various minimum wage exceptions under specific circumstances to workers with disabilities, full-time students, workers under 20 years of age (during their first 90 days of employment), tipped employees and student learners.

In addition, special rules apply to state and local government agencies in fire protection and law enforcement activities, volunteer services, and compensatory time off (instead of cash overtime pay). Employers are required to keep records on wages, hours and other items which are generally maintained as an ordinary business practice.

The Wage and Hour Division of the U. S. Department of Labor (DOL) enforces minimum wage provisions and investigates violation claims.

Minimum Wage rate

The current federal minimum wage rate is $7.25 per hour. To calculate an employee’s wage rate, an employer must include all forms of compensation given to, or paid on behalf of, the employee, except for:

  • Additional compensation for overtime hours, holiday hours or work that falls outside of a schedule set by an employment contract or collective bargaining agreement;
  • Compensation for paid time off (such as vacation, illness, holidays and production downtimes);
  • Gifts and monetary awards that are not measured by hours worked, productivity or efficiency;
  • Irrevocable employee benefit contributions (such as life insurance, health benefits and retirement accounts);
  • Value or income derived from an employer-provided grant; and
  • Value or income from stock option rights or stock appreciation and bona fide stock purchase programs.

Subminimum Wage Rates

The FLSA allows employers to hire students, student-learners, apprentices, messengers and disabled individuals at rates below the minimum wage rate. The FLSA also includes a special provision for tipped employee wages.

Learners, Apprentices and Messengers

Employers can pay learners, apprentices and messengers a wage rate below the minimum wage rate when they obtain a special certificate from the DOL. When issuing the certificates, the DOL will consider the number of workers an employer wants to cover under the special certificate, the number of hours worked by these employees and the employees’ length of service with the employer.

Learners are individuals receiving training for the occupation for which they were hired. Individuals qualify as learners until they acquire the necessary skills and attain the judgment level they need to perform their job responsibilities efficiently (generally up to 240 hours of vocational training with the same employer in a three-year period). Individuals may be learners in only two qualifying occupations. Learners can receive wages as low as 95 percent (75 percent for student-learners) of the minimum wage rate.

Apprentices are individuals (at least 16 years old) employed to learn a skilled trade through a registered apprenticeship program. The DOL establishes the wage rate for apprentices, along with other employment terms and conditions, in accordance with apprenticeship program guidelines.

Messengers are individuals employed primarily in delivering letters and messages. They may receive wages as low as 95 percent of the minimum rate.

Students

Employers can pay students a wage rate of as low as 85 percent of the current minimum rate after obtaining a special certificate from the DOL. These certificates are available to agricultural employers, retailers, service sector employers and institutions of higher learning. To obtain a special certificate from the DOL, employers must show that the student employee:

  • Does not work more than 20 hours in any workweek while school is in session;
  • Is a full-time student at an institution of learning; and
  • Does not violate any child labor laws (if applicable).

Institutions of higher learning have an additional requirement to show that each student-employee working under a certificate of subminimum wage rate is also enrolled as a full-time student at the institution where he or she works.

Employers wanting to hire more than six student-employees must show the DOL that employing the students does not reduce employment opportunities for non-student employees.

Disabled Workers

The DOL can also issue special certificates authorizing employers to pay subminimum wage rates to individuals whose earning capacity or productivity is impaired because of age, physical or mental deficiency or injury. Subminimum wage rates under these special certificates must be commensurate to the wages earned by nondisabled employees in similar jobs.

To receive a subminimum wage rate certificate for a disabled worker, an employer must provide the DOL with written assurances that it will review the disabled worker’s wages every six months and that it will adjust a disabled worker’s wages at least once per year to reflect prevailing rates for nondisabled workers in similar jobs.

Employers may not reduce a disabled individual’s wages below the wage rate indicated on the certificate, unless they receive prior authorization from the DOL to make the change.

Tipped Employees

The minimum hourly wage for tipped employees—also known as a cash wage—is $2.13 per hour. The FLSA defines a tipped employee as an individual who is engaged in an occupation in which he or she customarily and regularly receives at least $30 per month in tips.

The FLSA allows employers to use a tip credit of $5.12 per hour and reduce a tipped employee’s wage rate requirements because it assumes that the employee’s tips will offset the difference between the cash wage and the minimum wage rate, enabling the employee to receive wages at, or above, the minimum wage rate.

However, federal law requires employers to notify employees at the beginning of their employment that their wages are calculated using tips, a tip credit and a cash wage. The tip credit does not vary for a tipped employee who works overtime hours.

In addition, employers must subsidize a tipped employee’s wages to the extent that the employee’s cash wage and tips are less than the minimum wage rate.

Minimum Wage Rate Exemptions

FLSA exceptions are narrowly defined. Employers should check the exact terms and conditions for each exception carefully. The following examples are an illustrative but not all-inclusive list of employees exempt from the federal minimum wage:

  • Agricultural employees that are immediately related to their employers, are hand harvest laborers, work for employers that use more than 500 man-days of labor in any quarter of the previous calendar year or work in the range production of livestock;
  • Bona fide executive, administrative and professional employees (including teachers and academic administrative personnel in elementary and secondary schools);
  • Babysitters and companions for the elderly whose employment is casual and who provide services for individuals who are unable (because of age or infirmity) to care for themselves;
  • Computer system analysts, programmers, engineers and similarly skilled workers with wages of at least $27.63 per hour and whose primary duty is to apply system analysis techniques and procedures, consult with users or determine, design, develop, document, analyze, create, test or modify hardware, software or system functional specifications;
  • Domestic service employees whose compensation is not classified as wages under the Social Security Act or who work for less than eight hours in a workweek;
  • Newly hired employees under 20 years of age during the first 90 consecutive calendar days following their hiring date (as long as the employer does not displace, fully or partially, other employees’ work hours or benefits to accommodate new hires);
  • Newspaper delivery and publication employees when the newspaper has a circulation of less than 4,000 and its major circulation is within the county (or contiguous counties) where the paper is published;
  • Crew members and seamen working on foreign vessels;
  • Amusement park and recreational establishment employees working for a park that operates for up to seven months in a year or earns at least two-thirds of its total annual income in a six-month period (including individuals working for organized camps and religious and nonprofit educational conference centers);
  • Criminal investigators receiving availability pay (compensation provided for unscheduled services beyond the investigator’s 40-hour workweek in activities that require irregular or unscheduled work hours);
  • Seafood processing employees (individuals employed in the canning, catching, cultivating, farming, harvesting, packing, processing, propagating or taking of any kind of fish, shellfish, crustaceans, sponges, seaweeds and other aquatic forms of animal and vegetable life); and
  • Switchboard operators working for an independently owned public telephone company having no more than 750 stations.

Notice and Postings

Unless an exemption applies, federal law requires employers to post a notice explaining the FLSA to employees. The notice must be posted in every work establishment in a conspicuous place where employees regularly pass by and can easily read it. If an exception applies, employers may modify the model poster provided by the DOL to show the provisions that do not apply.

In addition, the FLSA requires employers that have been authorized to use subminimum wage rate certificates to display and make available to employees a poster explaining the general terms and conditions under which subminimum wage rates may be paid. A subminimum wage certificate notice for impaired workers must be displayed in a conspicuous place where impaired workers, their parents or guardians and other workers may read it. If the employer finds it inappropriate to post a subminimum wage rate notice for impaired workers, the employer may satisfy FLSA notice requirements by providing the notice directly only to all affected employees.

Prohibited discrimination and retaliation

Employers may not discharge or discriminate in any manner against an employee who files a complaint or cooperates with the DOL in an investigation or proceeding.

Penalties

Minimum wage violations under the FLSA are punishable by a fine up to $10,000, imprisonment for up to six months or both. In addition, these violations are subject to civil liability and employers may be required to compensate employees for unpaid wages, liquidated damages and any other penalties a court sees fit to impose. Fee amounts may increase for repeat and willful offenders.

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