For many start-up companies, it can be a difficult determination how
to pay the talent that you need. The celebrated and much publicized
$1.00 salary for mega company CEO's clearly doesn't figure in stock
ownership, perks of the business and the variety of benefits that a CEO
of a large well-funded and successful corporation would receive, nor is
it strictly legal in some circumstances.
When it comes to startups or maintaining a newer business, it is
important to understand how the law, rather from publicity, actually
works. The wage hour law requires certain minimum payments.Typically,
this is going to require that all employees receive at least minimum
wage for the services that they provide to the company. There are
certainly a wide number of exemptions which relate to how much an
employee is paid and whether or not an employee is paid hourly or
qualifies for overtime. In general, these exemptions may require such
things as managing two or more employees which, given a limited start up
workforce, may not be possible. They also require a number of other
items including earning a minimum of $455 per week for the work done.
These elements can be found in Section 13(a)(1)of the Fair Labor
Standards Act (2004).
When you are looking at computer programming and analysis the employee
test for wages can be even more complicated because it is $455 per week,
or if the employee is compensated on an hourly basis, he/she cannot be
compensated a rate less than $27.63 an hour in order to qualify for this
exemption. There can also be regulations in each state which relate to
how wages are paid including setting minimum wage rates as well as
potentially tweaking how the exemptions apply.
In Iowa, in general, the state wage payment and collection laws track
the Fair Labor Standards Act pretty cleanly and there aren't significant
differences in wage rates and requirements at this time. Iowa Code
91(a) does relate to how wages are paid and there can be issues in
determining how certain benefits such as paid time off are calculated
and whether or not those benefits are paid upon termination.
So what happens if you own the company? There is an exemption
for how much a person must be paid for those people who are active
managers and owners of the company. If an employee is acting as a "bona
fide executive" or business owner of the company and the employee owns a
20 percent equity interest in the enterprise, then the law indicates
that the employee does not need to be paid the minimum wage rate
specified in the Fair Labor Standards Act, 29.CRF.section 541.101. What
you own and how you run it can also come into play since significant
stock restrictions can impact on the 20% calculation. Start-up
companies or owners of unconventional companies with non-traditional
management structures need to be careful to make sure that their
employees are earning minimum wage or if applying the exemption that
they are earning no less than $455 per week for the week if those
employees are not active owners with a 20 percent interest in the
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