Payroll Accounting: Examining Employee Types and the FLSA Regulations

This essay provides an overview of payroll accounting, focusing on the distinctions between exempt and non-exempt employees, independent contractors, and statutory employees. It highlights the key difference between exempt and non-exempt employees, which lies in whether they are entitled to overtime pay, with non-exempt employees requiring time and a half for hours exceeding 40 per week. Independent contractors are defined as professionals providing services to the public, with control over the result of their work rather than the method. Statutory employees are treated as employees for employment tax purposes, bridging the gap between independent contractors and employees. The essay also examines the impact of the new Fair Labor Standards Act (FLSA), which raises the minimum salary threshold for overtime eligibility, potentially benefiting millions of salaried employees, and discusses strategies employers can use to adapt to these changes, such as increasing salaries, reclassifying employees, or increasing staff numbers to reduce overtime.

Running head: PAYROLL ACCOUNTING
Payroll Accounting
Name of the Student:
Name of the University:
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Table of Contents
Exempted employee...................................................................................................................2
Independent contractor...............................................................................................................2
Statutory employee.....................................................................................................................2
Effect of new law on salaried employee and their employers...................................................3
Reference....................................................................................................................................4

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The difference between an exempt and a non-exempt employee the main point is that
whether they are exempt from being paid overtime or not.
Exempted employee
If an employee falls within the purview of an exempted employee then it is
completely upon the desires of the employer’s whether to grant that employee with the
benefit of overtime pay or not. Some employer’s grant or form a separate pay package for the
employees to compensate them for non-allowance of the overtime payment (Kim et al. 2017).
In case of non-exempt employees the employer must pay the employees with minimum
overtime payment. That is they must be paid time and half the normal rate for every hour
worked more than the standard 40 hours. In addition to FLSA there are several rules laid
down by the Department of Labour which must be complied by the employer.
Independent contractor
In case of independent contractors the professional provide services to the general
public. The professional or persons within the purview of the definition of independent
contractors are doctors, veterinarians, lawyers, contractors, sub-contractors, public
stenographers, or auctioneers. The ultimate decision on whether they are independent
contractors are not is dependent upon the facts of each case (Mageto 2017). The general
principle that determines this is that a person is said to be rendering services as an
independent contractor of the payer has the right to control only the result of the work and not
how it is done or what is done. Any person carrying out operations as an independent
contractor is subjected to self-employment tax.
Statutory employee
A statutory employee is a separate company in business that can be distinctly
identified form its hiring company. For the purpose of levying employment tax the statutory

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employees are considered as employees by the statute. Hence they can be said as between an
independent contractor and an employee. One example of statutory employee is of a driver
who is charged with the charge of delivery of beverages other than milk, meat, vegetable,
fruit, or other bakery product; or picks up dry cleaning and laundry or dry cleaning, if the
driver is our agent or is hired on commission.
Effect of new law on salaried employee and their employers
The new FLSA is going to greatly benefit the salaried employees as the minimum
salary threshold for overtime bonus has been increased from $23660 to $47476. This means a
lot of white collar employees will be included within the purview of overtime pay. The
number of white collars employees to be included within the scheme is around 4.2 million.
The DOL has given reliefs to employers too like they are not required to do the so called
duties test in order to ascertain whether they fall in the exemption limit or not (Warren and
Jones 2018). In order to avoid the payment of overtime wage the employers can increase the
salaries of white collared employees, reduce bonuses of exempt staff, reclassify the exempt
employees as non-exempt and ensure hourly payment or increase the employee numbers to
reduce overtime requirement.

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Reference
Kim, M., Schmidgall, R.S. and Damitio, J.W., 2017. Key Managerial Accounting Skills for
Lodging Industry Managers: The Third Phase of a Repeated Cross-Sectional
Study. International Journal of Hospitality & Tourism Administration, 18(1), pp.23-40.
Mageto, J., 2017. Accounting Softwares in Australia. An Overview. GRIN Publishing.
Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.