Noncompliance with the Fair Labor Standards Act (FLSA) is no small matter. It can result in heavy fines, lengthy lawsuits and criminal charges that could ultimately cost your company millions.
But if you think a FLSA audit might be on the horizon, there are a few critical activities that you can focus on to make sure that you won't be caught off-guard. By putting an emphasis on staying compliant in your everyday payroll activities, you can improve your payroll processes overall and ensure that you're prepared if the Department of Labor does audit your organization.
Plan for Compliance
Instead of playing catch-up if you do get audited, develop a comprehensive plan for maintaining FLSA compliance in the long run. Implementing a workforce management system that’s up to date with FLSA requirements can help you catch potential payroll compliance issues and fix them yourself. Make sure the system you choose is flexible enough to be adapted to meet any future needs and legal requirements for different groups of employees (non-exempt, overtime-eligible salaried employees, commission-based employees, etc.).
Educate Your Managers
It's not unusual for FLSA investigators to conduct staff interviews during an audit. By empowering employees who manage payroll practices to enforce FLSA requirements for themselves, you'll have less risk of unintentional non-compliance. Review your payroll compliance policies with your team every few years to make sure they’re upholding the standards set for your organization.
Keep Records at the Ready
FLSA audits usually examine payroll activities for the previous two years. Keep track of all relevant payroll records for at least that long. If you’re audited, you'll need to provide the Department of Labor with clear, comprehensive evidence of compliance. Workforce management systems that centralize all employee and payroll documentation are great tools for keeping your records up to date and available on-demand.
Know What to Expect During an FLSA Audit
If you are audited, it's important that you understand what aspects of your business an FLSA auditor will be examining. In general, FLSA audits are concerned with finding and addressing instances of non-compliance regarding minimum wage, overtime, equal pay practices, record keeping and child labor regulations.
The auditor will use your records and employee interviews to determine payroll compliance for these areas, so it's important that all relevant resources are available to them. You may want to assign a point of contact within your organization who can help facilitate access to documentation and set up employee interviews as needed.
If you take steps to keep your payroll activities well-documented and put systems in place to minimize your chances of going out of compliance, you can make the auditing process as easy and straightforward as possible.
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