Impact of New Minimum Wage & Semi-Monthly Pay on Charter Schools

1. How the New Minimum Wage and Semi-Monthly Pay will Impact Charter SchoolsCCSA ConferenceMarch 13, 2019 Presented by: Kari Wallace, HR/Payroll Supervisor DMS

2. Present the progressive increase to California Minimum Wage Explain how the increase impacts exempt/non-exempt classifications Outline the need for semi-monthly payrolls Discuss some best practices to alleviate the California Legislation decision Purpose of Presentation 2

3. 15 Years of Consistent & Stable Growth California-Only, Charter-Only Focus 27 Clients serving 53 Charter Schools 43 Dedicated & Experienced Staff Members All Payroll Run In-House including STRS/PERS retirement reporting 100 % Employee Owned Company Delta Managed Solutions (DMS) 3

4. 1. Progressive Minimum Wage: • Senate Bill No. 3 – amending Labor Code Section 1182.12 • Two sets of criteria • Employers with more than 25 employees • Employers with less than 25 employees • Federal Minimum Wage • Local Ordinances 4

5. 1. Progressive Minimum Wage: Labor Code Projections 5

6. 1. Progressive Minimum Wage: • Federal Minimum Wage $7.25 hr. 6

7. 1. Progressive Minimum Wage: • Local Ordinances override state wage • El Cerrito • Emeryville • Los Angeles (city) • Los Angeles County • Pasadena • San Diego • San Francisco • Santa Monica • Sunnyvale 7

8. 2. Exempt / Non-Exempt Classifications 8

9. 2. Exempt / Non-Exempt Classifications • Exempt Criteria: • Not entitled to overtime pay • Must be paid a salary • Must earn a minimum annual, monthly or weekly salary that is double that of the state minimum wage (Salary Test) • Must fit into specific job category performing exempt job duties (Duties Test) 9

10. 2. Exempt / Non-Exempt Classifications Exempt Requirements: • Administrative, Executive, Professional, and Computer Professional duties • Employer bears Burden of Proof to show exemption • Salary can’t change, same each pay period • Salary Test - Can use Annual, Monthly or Weekly salary minimum salary • Required salary cannot be prorated for work less than full-time • Salary test is based on State of California minimum wage, not local ordinances • Can be paid on a 10, 11 or 12 month basis • Federal Exempt qualifications do not apply to teachers 10

11. 2. Exempt / Non-Exempt Classifications Duties Test: • Administrative – • Performance of work directly related to management policies or general business operations • Performance of functions in the administration of a school system or educational institution and work directly related to academic instruction or training • Discretion and independent judgment • Executes under only general supervision • Executive – • Management of the enterprise or department or subdivision • Customarily and regularly directs the work of two or more employees • Has the authority to hire/fire or change of status of employees • Discretion and independent judgment • Professional – • Licenses or Certified by State of California • Learned or Artistic Profession • Discretion and independent judgment 11

12. 2. Exempt / Non-Exempt Classifications Salary Test: 12

13. 2. Exempt / Non-Exempt Classifications • Non-Exempt Criteria: • Entitled to overtime based on the California Industrial Wage order • Can be paid a salary or an hourly wage • Subject to Minimum Wage • Can work in any field or in the case of education – can be Classified, Certificated, or Administrative 13

14. 2. Exempt / Non-Exempt Classifications Non-Exempt Requirements: • Must fill out a timesheet and document meal and rest breaks • Meal Break – 30 minute meal break if working 5 hours or more • Must start by the end of the 5th hour • Must be paid for Overtime for – • Over 8 hours in a day • Over 40 hours in a week • First 8 hours on the 7th consecutive day of a workweek • Must be paid at least twice per month 14

15. 3. Semi-Monthly Payrolls 15

16. Why Semi-Monthly Payrolls are Good Practice Considerations for making a Change Topics For This Section 16

17. Why Make the Change? Labor Code 204 (a) All wages, other than those mentioned in Section 201, 201.3, 202, 204.1, or 204.2, earned by any person in any employment are due and payable twice during each calendar month, on days designated in advance by the employer as the regular paydays. Labor performed between the 1st and 15th days, inclusive, of any calendar month shall be paid for between the 16th and the 26th day of the month during which the labor was performed, and labor performed between the 16th and the last day, inclusive, of any calendar month, shall be paid for between the 1st and 10th day of the following month. 3. Semi-Monthly Payrolls 17

18. Labor Code 204 However, salaries of executive, administrative, and professional employees of employers covered by the Fair Labor Standards Act, as set forth pursuant to Section 13(a)(1) of the Fair Labor Standards Act, as amended through March 1, 1969, in Part 541 of Title 29 of the Code of Federal Regulations, as that part now reads or may be amended to read at any time hereafter, may be paid once a month on or before the 26th day of the month during which the labor was performed if the entire month’s salaries, including the unearned portion between the date of payment and the last day of the month, are paid at that time. 3. Semi-Monthly Payrolls 18

19. Considerations: Culture of your staff Retirement reporting – what are your county’s expectations Other payroll Liabilities, i.e.; 403b, 401a, FSA Timekeeping systems Pay Dates 3. Semi-Monthly Payrolls 19

20. 4. Options for Best Practices 20

21. 4. Best Practices How does this impact your budget? • Salaries - Single largest expense in the budget • Therefore, plan carefully to ensure all staff are correctly budgeted 21

22. 4. Options for Best Practices • Audit Classified and Certificated salary schedules – • Ensure they are meeting minimum wage requirements • Update each fiscal year • Update each calendar year • Consider your budget at both 1st Interim and 2nd interim 22

23. 4. Best Practices Classified Salary Schedule 23

24. 4. Best Practices Certificated Salary Schedule 24

25. 4. Best Practices Certificated Salary Schedule 25

26. 4. Options for Best Practices • Monitor Overtime of Non-Exempt Staff 26

27. 4. Options for Best Practices • Consider Calendars and Exempt staff pay dates • 10 pay or 11 pay with Deferred Pay Monthly Exempt = Annual Minimum / 12 months $49,920.00 / $4,160.00 Pay 10 Months = Multiply by 10 = $41,600.00 Pay 11 Months = Multiply by 11 = $45,760.00 Deferred Pay = an additional deduction withheld on the employee’s net wages so that all taxes and benefits are collected as earned. The Deferred Pay is then paid back in June/July and does not include any additional deductions. 27

28. 4. Options for Best Practices • 10 Pay $41,600 = $4,160 / mo. Hold 2/10th of Net = $832 $832 x 10 mo = $8,320 June $4,160 July $4,160 • 11 Pay $45,760 = $4,160 / mo. Hold 1/11th of Net = $378.18 $378.18 * 11 = $4160

29. 4. Options for Best Practices Analyze FTE’s • Certificated Exempt Staff vs. Classified Non-Exempt staff • reallocate by removing Classified FTE and adding to Certificated FTE or add to Certificated Salary Schedule 1 FTE Classified Employee 8 hr. day – 185 days - $12.00 hr. $17,760.00 29

30. 4. Options for Best Practices • Use part-time staff for lower-level positions where possible and reasonable OR shared contracts Teacher Daily Rate = $49,920.00 / 185=$269.84 Classified Employee at $12 / hr. 8 hrs. day = $96 (keep in mind the part-time staff must be paid on a semi-monthly cycle and complete a timesheet) 30

31. 4. Options for Best Practices Be Pro-Active to initiate Legislation: • Lobby Groups • Local Legislature • California State Education Committee https://aedn.assembly.ca.gov/ 31

32. Questions? Resources: www.ca.gov www.dol.gov www.FLSA.us.gov www.edd.ca.gov www.calchamber.com 32

33. THANK YOU!