When do you count employee travel as time worked?  Of course, it depends on the situation. A recent question from a reader about my Overtime post last week also prompted a question about travel. In general, travel during regular work hours or time spent by an employee in traveling as part of his or her "principal activity" must be paid.  Travel which is "incidental"  is not paid.  The DOL also discusses employees who drive employer-provided vehicles:

Time spent in home-to-work travel by an employee in an employer-provided vehicle, or in activities performed by an employee that are incidental to the use of the vehicle for commuting, generally is not "hours worked" and, therefore, does not have to be paid.

Non-exempt (Hourly) Employees Only
Paying for travel time for employees is only relevant for non-exempt employees; that is, those employees who are eligible for overtime.  Exempt employees (managers and professionals) do not receive pay for travel time, since it is part of their jobs.

Let's look at some examples:

Travel Examples - Paid or Not Paid?

• An employee drives to work from his home every day.  You ask him to stop one day and pick up bagels for the staff meeting.  Not Paid. Time commuting to work is never paid time; the time to stop for the bagels is "incidental" to the commuting, and is not part of the employee's job.
• You ask an employee to get bagels for the office meeting.  If the employee makes this trip during normal work hours, he or she should be paid. It's not clear if the employee should be paid for this time outside of work hours, but it makes sense to me that if you ask an employee to do something for you after work hours, this too should be paid.
• A licensed practical nurse (LPN) sees patientsat several facilities for her employer.  Her drive time between those facilities is time worked, because it is part of her principal activity.

Questions? If you have an employee pay situation you would like to discuss, involving travel time or other related issue, post a question in the Forum.

One Final Note: Check with your state labor department to see if there are any rules which might supersede the federal rules.

No, I don't mean they are working outdoors in the blizzard.  Here is what I mean: As I write this, a blizzard is bearing down on us here in Iowa, and it makes me think of several times when I was a manager when I had to deal with issues relating to employees who, surprisingly, were unhappy that the office was shut down. 

A few years ago, when another blizzard was supposed to hit the Midwest the next day, one of my employees asked if she could take her work home (she was a secretary).  Another employee wanted to know if she could come in and do her work (she was a recruiter), even though no one else would be there. I said no in both cases.

The Fair Labor Standards Act (FLSA) has stated that if you, "suffer or permit" an employee to work, you must pay that employee.  This is an important principle in employment law, and one which many employers fail to understand.  Here are some examples:

• If you require an employee to work late to take phone calls from the West (or East) Coast, even if no phone calls come in, you must pay the employee for that time.
• If you allow an employee to come into the office when no one else is there, you must pay for that time, even though you have no way of knowing if the employee is actually working (or is watching reality shows on her portable TV)
• If you allow an employee to send and receive emails on the weekend, you must pay for this time, since emails are part of the job.
• If you allow an employee to work at his desk during lunch (taking phone calls, for example) the employee is not getting a lunch break.

You get the idea, right?  If you allow an employee to work, you must pay for that work. It doesn't matter if work is being done; you still have to pay. Many dedicated employees don't ask for pay, but I have known of some who demanded to be paid after the fact.  Live and learn.

Understanding the "suffer or permit to work" provisions of the Fair Labor Standards Act can save you money and prevent ill-will with employee.

For More Information
Read more about "Suffer or Permit to Work" on the Department of Labor website

This week, I want to focus on some more tax planning steps you can take before the end of the year to cut your business tax bill.  Today, look at the potential tax savings to be found by eliminating bad debts from your accounts receivable listing.

How Bad Debt Write-off Cuts Taxes
In December, Henry sits down with his CPA and reviews his accounts receivable aging report. He finds that several customers are no longer ordering from him and these same customers have had an outstanding balance since April.  The total from these non-paying customers is $12,500.  If Henry does nothing, that $12,500 will show up as income, meaning he will probably have to pay taxes on this income, even though he hasn't received it yet. (Henry's company uses accrual accounting.) If he "writes off" this amout as uncollectible, he does not have to include it in his income for the year.

What If Payment is Made Later?
If one or more of his non-paying customers decides to pay its bill before the end of the year or during the next year, Henry's accountant will have to reverset the non-payment. But this is a small price to pay to get what could be significant tax reduction.

For More Information
How to Interpret an Accounts Receivable Aging Report
How to Set up a Collection System
Cash Accounting vs. Accrual Accounting

Amazon has been accused of "overtime rounding" in a recent lawsuit. A former warehouse worker has brought suit against the company for its overtime rounding practices, and the lawsuit may turn into a class action.  The employee accuses Amazon of rounding down shift start and end times, costing workers up to 15 minutes of overtime each day.

What is Overtime Rounding?
It's just like it sounds - rounding shift start and end times to the nearest few minutes.  Some companies use this practice, because it is easier to calculate pay.  Rounding is acceptable, according to the Department of Labor, as long as it is to the benefit of the employee.

Here is an example: An employee starts at 8:07.  If the company rounds to the nearest 15 minutes, he would get a start time of 8:00, seven minutes to his benefit.  But if another employee starts at 8:08, she might get rounded to 8:15, in which case she loses seven minutes.  The Department of Labor says, "Employee time from 1 to 7 minutes may be rounded down, and thus not counted as hours worked, but employee time from 8 to 14 minutes must be rounded up and counted as a quarter hour of work time." I am assuming that the accusation in the Amazon case is that the company always rounded down.

Another example from the DOL better illustrates the effect of rounding on overtime pay: An employee's schedule is 7 a.m. to 3:30 p.m. with a thirty minute unpaid lunch break. The employee receives overtime compensation after 40 hours in a workweek. The employee clocks in 10 minutes early every day and clocks out 7 minutes late each day. The employer follows the standard rounding rules. The employee is entitled to overtime compensation. If the employer rounds back a quarter hour each morning to 6:45 a.m. and rounds back each evening to 3:30 p.m., the employee will show a total of 41.25 hours worked during that workweek. The employee will be entitled to additional overtime compensation for the 1.25 hours over 40.

Keeping Accurate Employee Records
It sounds pretty bizarre that in this digital age, particularly with a technology-dependent company like Amazon, that they couldn't figure out a way to track employee time to the second, let alone 15 minutes!

I hope this case makes you examine your employee record-keeping procedures, particularly how you calculate pay on time sheets or time cards.  You (the employer) are required to provide your employees,  the Department of Labor, and your state employment agency with verification of how pay was calculated.  Be sure you can explain your procedures and show that you are calculating each employee's pay exactly the same way.

For More Information:
Options for Recording Employee Time
Federal Employee Record Requirements

Image; John Sommers II/Stringer/Getty Images