Preventive Advice Regarding Employee Payroll, Records & Maintenance

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I deal with a lot of payroll issues. They arise in the course of litigation as well as day-to-day counseling & drafting & reviewing policies. Consequently, I thought it would be useful to post some preventive advice I’ve given clients.

• Don’t enter into verbal agreements with employees over any terms or conditions of their employment. This includes how much they’re paid, when they’re paid & how they’re paid (e.g., direct deposit, check, prepaid, cash or debit card).
  • However, if you feel that you must do a verbal agreement, document those agreements ASAP after you verbally enter into it. I realize that this sounds like a contradiction in terms, but the basic idea is that you can send an email to yourself or even the employee documenting what you’ve done. You can also ask the employee to respond back with their agreement or with any corrections or questions they might have.

• Periodically survey your employees on their payroll. You can survey all employees or randomly select a few. Ask them questions like:
  • Do you have any specific questions about your check?
  • Do you agree or disagree that you’re receiving all money owed to you?
  • Would you like more information about your compensation than what you currently receive? If yes, then what?
  • Have you ever spoken to any member of management about your check & didn’t receive a timely or complete answer, or do you feel that management threatened you for asking such questions?

• Periodically audit your payroll systems. You can also do this among randomly selected employees or all employees.

• If you make any adjustments (up or down) to an employee’s paycheck, always document it & get the employee to sign off acknowledging the change or even agreeing to it.

• Save all payroll records for at least 10 years. Illinois has a 10 year statute of limitations on claims (735 ILCS 5/13-206). In comparison, other states including California has a 4 year statute of limitations, and the federal Fair Labor Standards Act is up to three years, https://www.dol.gov/whd/regs/statutes/FairLaborStandAct.pdf, P. 57, §255.

• If you make any policy changes, consistent with my advice, it’s also a good idea to update your policies/procedures/handbooks to reflect these changes. Although it’s not absolutely necessary to do so, it’s strongly advised & it does add some extra assurance that your employees get the message.