---
title: Don’t Make These Payroll Compliance Mistakes
description: The FLSA mandates non-exempt employees be paid for all hours worked, which sometimes includes non-productive time. Here are four common scenarios.
image: https://blog.axcethr.com/hubfs/wage-and-hour-mistakes-_1200-%C3%97-628-px_%20(1).webp
---

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Don’t Make These Payroll Compliance Mistakes

4:25

# Don’t Make These Payroll Compliance Mistakes

 By [Bill Stephens, CPP](https://blog.axcethr.com/author/bill-stephens) on [Feb 02, 2023](https://blog.axcethr.com/dont-make-these-wage-and-hour-mistakes)   
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Payroll compliance is vitally important to the legal operation of any business. Consistently applied pay policies, accurately calculated overtime and proper FMLA administration all protect your business from legal problems and provide your workforce with consistent compensation. 

There have been a variety of changes to payroll compliance for 2023 that every business should know about and understand:

- [Form W-4](https://www.americanpayroll.org/docs/default-source/2019-forms-and-pubs/19m14-comparison_charts.pdf) for income tax withholding underwent numerous changes in 2020, such as number of allowances not applicable, and elected allowances not used. The only significant difference in 2023 is a change to standard deductions, as noted on the form's deductions worksheet.
- The IRS raised the exclusion for [elective deferrals on retirement plans](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-403b-contribution-limits) from $20,500 In 2022 to $22,500.
- The total allowable [employee contributions for healthcare FSAs](https://www.businessgrouphealth.org/resources/irs-increases-2023-health-fsa-contribution-limit) increased from $2,850 in 2022 to $3,050 in 2023.

In addition to understanding the 2023 changes, there are four common wage and hour mistakes employers need to avoid.

[![New call-to-action](https://no-cache.hubspot.com/cta/default/2652187/40b06890-24cc-4e62-8a4f-3f5fa08679a6.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/40b06890-24cc-4e62-8a4f-3f5fa08679a6)

## 1. Misclassifying Employees

The risk of misclassifying employees as independent contractors or interns is made worse by the gig economy. Independent contractors control their own hours and how they perform work, and generally provide their own tools and supplies.

If you as an employer are controlling and directing how and where work is performed and providing equipment but classifying the worker as an independent contractor and not an employee, you need to look carefully at the business relationship. [Misclassifying employees](https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee) as independent contractors can leave your company liable for back payroll taxes, fines and penalties.

## 2. Adjustments to Salaried Employee Pay

Employers must use caution with [exempt employee pay](https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/when-can-deductions-be-made-from-exempt-employees-salary.aspx) and pay a fixed salary each pay period. This can’t be reduced due to the quality or quantity of work performed and must be the full salary each week work is performed, with a few specific exceptions. Quantity and quality of work issues are performance issues that can’t be addressed by docking exempt employees' pay. 

Exceptions to the no-pay-docking rule for exempt employees include when no work is performed in one or more days; FMLA leave is taken; paid leave is taken for sickness or disability; safety penalties for violating safety rules of major significance; unpaid disciplinary suspension for workplace conduct rules violations such as harassment or workplace violence; and a partial work week during the first or last week of employment.

[![telework pay guidance what employers should know](https://no-cache.hubspot.com/cta/default/2652187/c62f6a83-0caf-43a5-ac5c-cc78e4d9adb0.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/c62f6a83-0caf-43a5-ac5c-cc78e4d9adb0)

## 3. Non-Exempt Employee Pay for Time Spent in Meetings, Training & Work-Related Travel

Employers must pay for time non-exempt employees spend [in meetings and training and on work-related travel](https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs22.pdf). Exceptions include if attendance is voluntary or if the meeting or training is not job-related.

Travel for work, other than a normal to-and-from commute, must be paid. Employers may not deduct for time to travel to different job sites or for out-of-state travel. Exceptions vary by state, so employers must know their state's rules regarding pay for work-related travel.

RELATED: [Asleep on the Job - When You Have to Pay Employees for "Unproductive Time" >>](https://blog.axcethr.com/asleep-on-the-job-when-you-have-to-pay-employees-for-unproductive-time)

## 4. Not Paying Attention to Pay Equality

Employers must pay men and women in the same workplace equal pay for equal work. Work has to be substantially similar, and job content – not job title – determines job equality. The [Equal Pay Act](https://www.dol.gov/agencies/oasam/centers-offices/civil-rights-center/internal/policies/equal-pay-for-equal-work) applies to all forms of compensation, including overtime pay, bonus pay, benefits such as vacation pay, insurance, retirement plans, stock options and travel expense reimbursements. Employers can’t reduce wages to equalize pay.

RELATED: [How to Accurately Measure Time & Attendance >>](https://blog.axcethr.com/flsa-overtime-rules-how-to-accurately-measure-time-and-attendance)

Employers who handle payroll in-house should consider time-tracking software and outsourcing to automate and eliminate human error in payroll. Businesses can prevent expensive and preventable mistakes on payroll taxes by staying knowledgeable and current on federal, state and local tax laws and using accurate and timely payroll reporting and employee classification.

## **[![Stress-Free Payroll Processing](https://no-cache.hubspot.com/cta/default/2652187/interactive-189805175855.png)](https://blog.axcethr.com/hs/cta/wi/redirect?encryptedPayload=AVxigLJ6XvFxHg8QW7lYh07tV3qYZvlAERJVEl5NB%2FNAYoiQ3AM2Bwc%2B5PW4xTLUaMpNVTWBwyJMyz48PCPgg4bEpkhs%2B%2BxAaqyq0yNtmiYNhJYtrlNol62Gleu93VOfHo17jZfyfC%2Fo3a5N9WYT9avViAjM3j8oAHP0Uar%2BGzABvmwFcBk%2FPQZ1xbJKoOKgCza%2FcNc2Di8ZbkvO7gQ9ZLBmgJ3cP9kKUSpBTVOxd7QFJhBiLpL9%2F9Y5VTW0Q7sLHIvPTW508Ceix2nFPLw0SCixRD5GzJuNJP6bNS%2F5XBPK6FTHKakQWNEkSCxZ&webInteractiveContentId=189805175855&portalId=2652187)**

## **Avoid Costly Mistakes with the Right Payroll Partner**

Wage and hour violations can result in serious financial penalties and reputational damage—risks that small business owners can’t afford to take. From misclassifying employees to failing to pay overtime correctly, even unintentional errors can have lasting consequences. Partnering with a trusted payroll expert ensures your business stays compliant, your employees are paid accurately, and you have peace of mind knowing the details are handled.

Don’t leave compliance to chance. [Discover how Axcet’s payroll services](https://www.axcethr.com/services/payroll-and-tax-administration-services/payroll-services/) help protect your business and streamline your payroll process. 

[![PEO Payroll Services](https://no-cache.hubspot.com/cta/default/2652187/e1855a1e-6f81-48cb-b4a1-2c8a96b0f7c4.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/e1855a1e-6f81-48cb-b4a1-2c8a96b0f7c4)

[![Bill Stephens, CPP](https://blog.axcethr.com/hs-fs/hubfs/Bill_Final-2.jpg?width=80&height=80&name=Bill_Final-2.jpg)](https://blog.axcethr.com/author/bill-stephens)

Written by

#### [Bill Stephens, CPP](https://blog.axcethr.com/author/bill-stephens)

Bill Stephens, CPP is an HRIS Payroll Analyst at Axcet HR Solutions, where he focuses on optimizing payroll systems, improving data accuracy, and enhancing the overall client and employee experience through technology. He works at the intersection of payroll, HR systems, and process improvement—helping ensure that payroll operations run efficiently, accurately, and in compliance with evolving requirements.

Bill plays a key role in analyzing, testing, and implementing system functionality within Axcet's payroll and timekeeping platforms, including PrismHR. He partners closely with payroll, IT, and client service teams to evaluate workflows, identify opportunities for automation, and streamline processes across the organization. His work helps reduce manual effort, improve reporting capabilities, and ensure consistency in how payroll systems are configured and used.

In addition, Bill supports system upgrades, manages user roles and configurations, and serves as a primary resource for troubleshooting system-related issues. He also develops training and best practices that help both internal teams and clients effectively use payroll and HR technology. His ability to translate complex system functionality into practical, user-friendly solutions makes him a valuable partner across departments.

Bill holds the Certified Payroll Professional (CPP) designation, demonstrating his expertise in payroll processes, compliance, and system implementation. Through his writing, Bill shares insights on payroll operations, HR technology, and process improvement—helping businesses better understand and leverage the systems that support their workforce.

Read more

<https://www.axcethr.com> <https://www.linkedin.com/in/william-stephens-cpp-0418b747/> [View all posts →](https://blog.axcethr.com/author/bill-stephens)

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#### [Exempt vs. Nonexempt: What's the Difference? ![exempt vs nonexempt](https://blog.axcethr.com/hubfs/what-is-the-flsa-_1200-%C3%97-628-px_-_1_%20(1).webp)](https://blog.axcethr.com/exempt-v.-non-exempt-whats-the-difference)

#### [![what is at will employment](https://blog.axcethr.com/hubfs/what-is-at-will-employment-_1200-%C3%97-628-px_%20(1).webp) What is At-Will Employment? ](https://blog.axcethr.com/what-is-at-will-employment)

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  "articleBody" : "Payroll compliance is vitally important to the legal operation of any business. Consistently applied pay policies, accurately calculated overtime and proper FMLA administration all protect your business from legal problems and provide your workforce with consistent compensation. There have been a variety of changes to payroll compliance for 2023 that every business should know about and understand: Form W-4 for income tax withholding underwent numerous changes in 2020, such as number of allowances not applicable, and elected allowances not used. The only significant difference in 2023 is a change to standard deductions, as noted on the form's deductions worksheet. The IRS raised the exclusion for elective deferrals on retirement plans from $20,500 In 2022 to $22,500. The total allowable employee contributions for healthcare FSAs increased from $2,850 in 2022 to $3,050 in 2023. In addition to understanding the 2023 changes, there are four common wage and hour mistakes employers need to avoid. 1. Misclassifying Employees The risk of misclassifying employees as independent contractors or interns is made worse by the gig economy. Independent contractors control their own hours and how they perform work, and generally provide their own tools and supplies. If you as an employer are controlling and directing how and where work is performed and providing equipment but classifying the worker as an independent contractor and not an employee, you need to look carefully at the business relationship. Misclassifying employees as independent contractors can leave your company liable for back payroll taxes, fines and penalties. 2. Adjustments to Salaried Employee Pay Employers must use caution with exempt employee pay and pay a fixed salary each pay period. This can’t be reduced due to the quality or quantity of work performed and must be the full salary each week work is performed, with a few specific exceptions. Quantity and quality of work issues are performance issues that can’t be addressed by docking exempt employees' pay. Exceptions to the no-pay-docking rule for exempt employees include when no work is performed in one or more days; FMLA leave is taken; paid leave is taken for sickness or disability; safety penalties for violating safety rules of major significance; unpaid disciplinary suspension for workplace conduct rules violations such as harassment or workplace violence; and a partial work week during the first or last week of employment. 3. Non-Exempt Employee Pay for Time Spent in Meetings, Training &amp; Work-Related Travel Employers must pay for time non-exempt employees spend in meetings and training and on work-related travel. Exceptions include if attendance is voluntary or if the meeting or training is not job-related. Travel for work, other than a normal to-and-from commute, must be paid. Employers may not deduct for time to travel to different job sites or for out-of-state travel. Exceptions vary by state, so employers must know their state's rules regarding pay for work-related travel. RELATED: Asleep on the Job - When You Have to Pay Employees for &quot;Unproductive Time&quot; &gt;&gt; 4. Not Paying Attention to Pay Equality Employers must pay men and women in the same workplace equal pay for equal work. Work has to be substantially similar, and job content – not job title – determines job equality. The Equal Pay Act applies to all forms of compensation, including overtime pay, bonus pay, benefits such as vacation pay, insurance, retirement plans, stock options and travel expense reimbursements. Employers can’t reduce wages to equalize pay. RELATED: How to Accurately Measure Time &amp; Attendance &gt;&gt; Employers who handle payroll in-house should consider time-tracking software and outsourcing to automate and eliminate human error in payroll. Businesses can prevent expensive and preventable mistakes on payroll taxes by staying knowledgeable and current on federal, state and local tax laws and using accurate and timely payroll reporting and employee classification. Avoid Costly Mistakes with the Right Payroll Partner Wage and hour violations can result in serious financial penalties and reputational damage—risks that small business owners can’t afford to take. From misclassifying employees to failing to pay overtime correctly, even unintentional errors can have lasting consequences. Partnering with a trusted payroll expert ensures your business stays compliant, your employees are paid accurately, and you have peace of mind knowing the details are handled. Don’t leave compliance to chance. Discover how Axcet’s payroll services help protect your business and streamline your payroll process.",
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