Texas law aligns with the best practices in other states that give employers until the following pay period to correct payroll errors. The Fair Labor Standards Act dictates that employees have the right to prompt payment of wages or salaries and that employers are obligated to make these payments as soon as possible. [1]
In this article we examine the practices laid out by the Texas Payday Law, consider the timeframes for correcting payroll, and consider a way that you can eliminate payroll errors completely.
Call us today for a free consultation to discuss payroll errors and what we can do to help you eliminate mistakes.
Texas Payday Law
Payroll accuracy is crucial for both employers and employees. Employers must put systems in place to pay wages in a timely manner, as failing to do so will cause employers to be liable under the federal law, Texas government code, and labor laws that govern these matters.
One such law is the Texas Payday Law, enforced by the Texas Workforce Commission (TWC), which sets the rules for wage payments to employees. It covers aspects such as the frequency of wage payments and the employer's obligation to pay wages owed. Employers must pay non-exempt employees at least twice a month and exempt employees at least once a month.
Further reading: What Is The Tax Rate In Texas For Payroll
Time frames for correcting payroll errors
General guidelines
Texas employers are expected to correct the error by the next pay period. However, a payroll mistake shouldn’t be left that long because it puts a financial strain on the employee - and unfairly so. There are a number of payroll errors that should be dealt with immediately:
Non-payment of wages or salary
A reduction in the employee’s gross pay
A reduction in wages that causes the employee to earn less than the minimum wage
Payroll mistakes like this undermine the trust of the employer-employee relationship. This kind of thing is often seen with the wages of independent contractors because employers believe that contractors do not have recourse to claim wages. This is simply not true.
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Employees and contractors have the right to pursue remedy under the Texas Payday Law. From the date the wages are due, an individual has 180 days to file a claim. The Texas Workforce Commission will investigate the claim and give an order of determination. Either party has 21 days to contest this determination. If there is no appeal after 21 days, the employer has 30 days to correct the payroll error.
Employees can also contact the Wage and Hour Division of your local Texas state department. They will give you guidance on the correct processes to follow for your specific claim.
Overpayments
Mistakes happen. A paycheck error in which an employee is overpaid can be as damaging as being underpaid. In this case, the employee’s honesty and integrity come into question if they refuse to give the money back.
Human resources can inform the employee of the wrong amount at any time. However, necessary corrections should be made as soon as possible. The employer might decide to correct this on the next paycheck by deducting money from the employee, but all requests should be fair. For instance, if the employee did not know it was a mistake and assumed that it was due to some variable pay amount, then it is unreasonable for the employer to demand immediate repayment. Payment terms should be negotiated with the employee.
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Best practice for making payroll corrections when it is wrong
If a payroll error is discovered on May 10th and the next payday is May 15th, the employer should aim to correct the error by May 15th.
If the error is discovered shortly before a payday, such as May 14th, the correction should ideally occur by the following payday, ensuring the issue is resolved within the shortest possible time frame.
If the employer has two pay runs, for instance, the 15th and 30th, they should make the payment by the very next pay run.
How you can eliminate payroll errors
This section is aimed at employers who want to avoid costly payroll mistakes.
Payroll software is one way of eliminating payroll errors because it reduces the risk of human error when it comes to payroll. However, software is only a part of solving the problem. Payroll problems are a systemic problem that includes a lack of understanding of local state laws, how to deal with employees when there are wage disputes, and how to deal with contractor compensation.
Setting this up may require the expertise of an accounting firm, like Hall Accounting Company. We are a Dallas-based accounting firm that specializes in bookkeeping, payroll, taxation and CFO services for small businesses and startups.
We can help you eliminate payroll errors by recommending the best payroll software for your business type, providing all the payroll expertise you need, and helping you correct payroll problems before they become mistakes. These services are especially valuable if you don’t have a bookkeeper and are trying to manage your books, payroll, taxes and business strategy yourself.
We would love for you to get back to doing what you truly love and let us worry about your bookkeeping. Give us a call or schedule a free consultation to discuss your needs today.
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References:
1. https://www.dol.gov/agencies/whd/flsa