Case
Study Q&A: Payroll
Reprinted with Permission from PBC,
Inc.
In our company we have only salaried employees, but we have a policy that overtime is paid on the 1:1 basis: if a salary of a person is $90,000 per year, we calculate hourly pay as $90000/52/40=$43.27. Then, if at any given week this person works, for example, 45 hours, he gets paid extra $43.27*5=$216.35
Q: Is this policy legal under
the government accounting practice, and can we recover this extra pay and
associated indirect costs from the government?
A: If your policy is documented the payment for hours worked in excess of
40 per week is an allowable expense.
NOTE: You do need to be aware that excess salary for employees if their annual
compensation is high might be challenged as unreasonable and thus a portion
would be deemed unallowable.
Q: Can we (and should we?) put
reasonable expectations of overtime in the budgets for proposals?
A: There is no need to adjust proposals for your practice of paying straight
time for hours worked in excess of 40 per week, unless people continuously
charge significant amounts of overtime then your indirect rates might need
to be adjusted (primarily fringe).
Q: Are the employer-paid payroll
taxes allowable costs? If they are allowable, are they compensated as direct
or indirect expenses?
A: Payroll taxes are part of fringe benefits which are usually indirect except
for NIH and NSF where they can be included as direct.