Neil P patelParticipant3 weeks, 5 days ago
I’m a small business owner in AZ that have 5 part time employees. I just recently I received a call from Hour & Wage Labor Department stating they are conducting an audit. They are asking for 3 yrs off time card and other reports. After doing some researched, I came to know small biz are also required to give Sick Time off (1 hr for every 30 hrs worked) ?
As being a small business, I don’t really have an HR person. I process my payroll with online payroll company but do not keep payroll schedule on file more than a year.
Can anyone help with any advise on how to handle this process? What are my consequences not keeping all the records and not offer Sick time off that apparently started
2nd half of 2018?
I appreciate it!1 Reply
Laura HandrickModerator3 weeks, 5 days ago
Thanks for posting this question. This recently happened to a dear friend’s business in AZ. First, you’ll be audited (they won’t like that you don’t have timekeeping and payroll records).
Second, you’re likely to be ordered to pay back pay to all affected employees — even those that no longer work for you. (Without records, you may be required to provide the maximum amount — up to 24 hours of back pay sick pay to each eligible employee.) Then, most likely they’ll fine you a similar amount.
But there’s good news.
1) Contact your payroll company. They should have records going back even if you don’t have them as they processed the payroll for you. Get those.
2) Consider replacing your payroll company asap with one that has your back and is aware of AZ labor laws. (A good payroll firm would not have let this happen!)
3) Calculate to the best of your ability, the sick leave retro-pay you believe is due to your employees since 7/2018. (If you’re not sure exactly, be safe and pay 1.5 days sick leave for 2018 for each employee, and then start 2019 either with a 3-day lump sum for each employee or an accrual that gives them 1-hour sick leave for every 30 hours worked.) Do this immediately!
4) ASAP – document a sick leave policy and make sure each part-time employee is aware of the rules for how it’s accrued and used going forward.
The labor dept will see your GOOD FAITH efforts to remedy the situation and may waive any fine as it’s your first offense. (No guarantee!) However, the wage and hour division wants to ensure businesses don’t cheat employees — they’re not out to punish, as much as educate small businesses. If you do everything in your power to remedy the situation before they show up, that will serve you well.
Here are relevant articles to get you back on track.
Sick Leave – and how to create a policy / with a template.
Retro Pay – and how to calculate it.
Document Retention Rules – what to store and how long to store it.
Best Payroll Service for small business — we recommend Gusto – For 5 employees in AZ, you’d pay about $69/month and get all tax filings and labor law compliance, and it’s probably less than you’re paying your payroll provider now. Their offices are in CA, and their customer service is great.
Best of luck to you!
Laura, HR Staff Writer
(Not a licensed attorney or tax expert)1 Reply
You must be logged in to reply to this topic.
Not signed in?
Sign in to participate on our website!