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

My husband just called me to say our favorite local pizza place closed December 1.  Like many other small businesses, they shut their doors with no notice to the public or employees.  It's sad to hear about this failure, not only because I enjoyed their pizza (they had a great lunch buffet!) but because another small business has been lost in our community.

I could talk all day about why small businesses fail, any many business experts provide long lists of causes, but in my experience one of the primary causes of failure is lack of cash. I'm talking about getting enough money at start-up to ride out the rough times and take advantage of the good ones.  Lack of cash is the main reason the SBA says roughly 50 % of small businesses fail in the first five years.

But where to get enough cash for start-up and operations?
As I have written about recently, the availability of traditional bank loans has been dropping, and even the government-backed incentives such as the Recovery Act loans are going away. So where does a business go to get funds for start-up and operations?

Credit Card Financing is a BAD Idea
Many small businesses have resorted to credit cards to finance start-up or expansion.  But credit cards are a bad idea getting worse. A recent study by the Kauffman Foundation shows that for every $1,000 in credit card debt, the small business failure rate increases by 2.2%.  Small businesses must pay ridiculously high rates for the use of these cards - upward of 30% in many cases.  So it makes sense to find other ways to get money.

Other Creative Ways to Get Cash
Some other ways you might consider to get cash for your small business:

• Use trade credit or vendor financing, that is, buy from suppliers and let them finance your purchase
• Sell your accounts receivables to get money to buy inventory
• Lease equipment instead of buying it.

And one final way, which you must consider carefully: borrow from family or friends.

For More Information
Creative Financing Sources for Tough Financial Times

It's a confusing subject, and I get questions about it all the time. I'm talking about the "employee vs. owner" question.  There are several points of discussion here: (1)  What is the owner's status in the business? (2)  How does the business person take money from the business?

What is your status in the business?
Are you an owner or an employee in your business?  It depends on the type of business:

• Sole proprietorship - you are the owner, not an employee
• Limited liability company - you are most likely an owner (member), not an employee, unless you elect to be taxed as a corporation (see below).
• Partnership - you are an owner, not an employee
• Corporation - you are an employee.  You are also a shareholder and you are also on the board of directors, so you have multiple roles.

How Do You Take Money from Your Business?
If you are in business, you expect it will provide you an income (at some point, anyway). So how do you get money from your business?  It depends on the type of business:

• If you are an owner, you can take a draw from the business for personal expenses.  This draw is not a deductible business expense; it's just money you take from profits (assuming there are profits!) to use to pay personal bills.  When you take a draw, you should write a check to yourself from the business checking account and deposit it in your personal checking account.
• If you are an employee, you take a salary from the business.  Your salary must be reasonable, and it is considered a deductible business expense. Your FICA taxes are shared by you (as the employee) and corporation

Remember, taking money from your business as a draw is NOT a deductible business expense; taking a salary IS a deductible business expense.

If you have questions about this topic, send a comment or post a question on the Forum. Questions help me know what needs to be explained, and they help others gain a more complete understanding of complicated tax and legal matters.

For More Information
Determining reasonable salaries for corporate officers
Self-employment taxes for employees and owners

If you own a business, it is most likely that you are a sole proprietor.  According to the Small Business Administration, sole proprietorships represent about 73% of U.S. businesses.  That's an amazing number! It means almost three out of four businesses in the U.S. are sole proprietorships.  Many sole proprietors are women, and the SBA study showed that women-owned sole props increased more than men-owned sole props from 1997 to 2000.

As I have said often, if you are in business and you have not selected a specific business form, you are a sole proprietor.  With the economy still lagging and unemployment benefits running out, more people are considering starting out in business. Many of these people are using their expertise in the corporate world to create a business that brings this expertise directly to other businesses.

Today is also a time when many businesses are considering outsourcing (looking outside the company for expertise), both to save money and keep the number of employees low.  It's a perfect time to be an expert!

But as I have also warned many times, starting a small business means more than just getting some business cards and finding someone to buy your product or service.  You must "act like" a real business and you must pay your taxes and comply with legal requirements for businesses, just like any other kind of business.

If you are one of the 15.1 million sole proprietors in the U.S., or you are considering becoming a business owner (that is, a sole proprietor), you can find the information you need to take care of these tax and legal matters here on my website.  And don't hesitate to ask questions on the Forum; other small business owners can help you and I can always find an answer I don't know it.

For More Information
All About Sole Proprietors/Sole Proprietorships

Simple Steps to Business Startup