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Question

Well, I actually have multiple questions, and they’re all about paying my employees. I work in the mental health field and employee therapists and social workers. I’ve heard that I can pay my employees multiple rates for different work, that “commission” might not be the right word to describe fee splits, and that I can’t make up certain pay rates (I have to use what the state of California tells me to use). Is all of this true?

Answer

There’s a lot going on there, so let’s break down the individual questions (and maybe a few more) together, shall we?

FAQ #1: I’m only paying my non-exempt employees for the time spent seeing clients (“clinical work”). Anything outside of that is unpaid. Is this legal?

Nope! Not legal. California’s wage and hour laws require that the employee be compensated for any hours he or she is “suffered or permitted to work, whether or not required to do so.” That means that if an employee is spending time sending emails, answering phone calls, handling their portion of the billing, attending meetings within the practice, attending trainings that their employer requires them to attend, etc…. all of that needs to be compensated.

One gray area is paying for supervision time of associate therapists. California’s licensing body for therapists requires that all associates (therapists in training) receive supervision of a licensed therapist. Because it’s the state requiring this, and the employer technically isn’t making this a condition of employment as an associate, many employers believe that they don’t have to pay their associates for supervision time. Although the law has not clearly weighed in on this scenario, it’s short-sighted to choose not to pay for supervision time. Not only do employers run the risk of breaking wage & hour laws, this can also be incredibly pressing on morale. We never recommend not paying for supervision time.

FAQ #2: Can I pay my non-exempt employees different rates for different types of work (for example clinical work vs administrative work)?

Yes, you can! You can pay one rate for all work, or different rates for different types of work, so long as all rates are at least minimum wage. It’s totally up to you, but there are some downsides to this. This might create more work for you in determining the “regular rate of pay” for the purposes of overtime, paid sick days, PTO and things like that.

FAQ # 3: How would I calculate the regular rate of pay? Can I just make up a value I feel is fair?

No, you cannot just make up a value for the regular rate of pay. The state of California has rules for this! For example, in this scenario where two (2) or more rates of pay are being used, you would need to calculate a weighted average of the two (2) rates over the course of a workweek. This is what the Department of Industrial Relations has to say specifically:

“If you are paid two or more rates by the same employer during the workweek, the regular rate is the ‘weighted average’ which is determined by dividing your total earnings for the workweek, including earnings during overtime hours, by the total hours worked during the workweek, including the overtime hours. For example, if you work 32 hours at $11.00 an hour and 10 hours during the same workweek at $9.00 an hour, your weighted average (and thus the regular rate for that workweek) is $10.52. This is calculated by adding your $442 straight time pay for the workweek [(32hours x $11.00/hour) + (10 hours x $9.00/hour) = $442] and dividing it by the 42 hours you worked.”

FAQ #4: How do I determine which workweek to use for calculating the weighted average?

That depends. The Department of Industrial Relations gives a few different options, depending on the scenario, when it comes to the regular rate of pay for paid sick leave:

  1. Paid sick time for nonexempt employees shall be calculated in the same manner as the regular rate of pay for the workweek in which the employee uses paid sick time, whether or not the employee actually works overtime in that workweek.
  2. Paid sick time for nonexempt employees shall be calculated by dividing the employee’s total wages, not including overtime premium pay, by the employee’s total hours worked in the full pay periods of the prior 90 days of employment.
  3. Paid sick time for exempt employees shall be calculated in the same manner as the employer calculates wages for other forms of paid leave time.

Remember, exemption is not something you decide on arbitrarily; there are laws regarding this too! Not sure if your employees are exempt or nonexempt? Speak to an attorney for guidance.

FAQ #5: Can my payroll provider calculate the regular rate of pay for me?

No, unless you’re paying your employees a single rate, generally speaking most payroll providers will not calculate this for you. They will likely provide you with the information and instructions required to calculate it and have a place for you to input the calculated amounts, however in the end it is up to you to calculate those amounts. There are calculators like this one that will assist you, however it is important to note that you still need to make sure you put the right numbers in the right places or the calculator will give you bad information, and you’ll be on the hook for that error. “I didn’t put my numbers in the right place when using the calculator” is not a valid defense in a court of law, so make sure you have someone double check your numbers, okay?

FAQ #6: This seems like a lot of work. Isn’t there a way I can just avoid having to calculate the regular rate of pay every time?

There is! Not trying to be snarky, but the easiest way to do this is to not pay your employees different rates, and instead, only use a single rate.

So how do you do this if you have employees providing different types of work that are worth different amounts? Instead of paying your employee two different wages, you can calculate the projected average pay ahead of time and use that as the normal hourly wage.

For example, let’s say you have a clinician that was hired to provide 15 clinical hours per week and your internal metric for this is $120 per hourly session. You know that on an average week, the employee will need to come to 1 team meeting, 2 hours for trainings or practice marketing, and 1 extra hour for note taking in case they need a little more time, with all 4 of those hours having an internal metric of $25. We then create your projected weighted average:

  • [(15 hours x$120) + (4 hours x$25)]= $1,900 in a week.
  • If we divide that weekly total by the 19 total hours worked= $100 per hour. Here we have a projected weighted average of $100 for an average week, which can be the one rate you pay for everything.
  • So in the next week, if they have 14 clinical hours and 5 admin hours, the pay is still $1,900 because we’re paying $100 for each hour (not multiple rates).

The upside to this is that your regular rate of pay is just $100, because there’s now only one rate for everything; no math involved. The downside to this method is that if you have an employee who is not pulling their weight and is bringing in very little clinical work but is still going to meetings, marketing, etc., then you’ll be paying them more for that time while not having income flowing in. Essentially, it’s a potentially less exact evaluation of the value brought in by the employee, but requires less work on your end.

HEADS UP: This section (and the rest of this resource) are provided as information only and should not be concerned legal advice or counsel. Do not rely on this illustration in setting up your payroll; speak to an attorney to determine if this is the right option for you. See our full disclaimer at the bottom of this resource!

It’s important to note as well that this financial projection is essentially what normally goes into determining proper wages for employees and determining what you can afford as a business. Because of this, going through this calculation is a good exercise, regardless of what you ultimate decide!

FAQ #7: Can I pay my employees commission for clinical work? For example, if a session fee is $300, can I pay my employee 60% commission, where they take $180 and I take $120?

Uhhh no and yes. No, you cannot pay your employees “commission,” because commission can only be paid to certain types of employees (like salesmen), and therapists are not one of those types. However, the situation described above is perfectly fine, because that’s how businesses make money! The business charges a certain amount to clients, the employee gets paid for their work, and the employer takes a cut to cover their expenses as the employer. This is an important distinction to understand because (a) as we said, commission is technically a different legal concept; and (b) there are certain rules that apply to commission that do not apply to normal pay situations, so you want to make sure you have the correct understanding of the situation, so you know which rules apply.

Wrapping Everything Up….

These are just a few of the questions that we’re asked frequently, and we’re sure more will pop up over time. If you have any additional questions similar to these, let us know by emailing bertie@inbetterwetrust.com. We will do our best to help answer your questions, and who knows, they might end up on an updated version of this resource in the future!

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Disclaimer: Although this article may be considered advertising under applicable law and ethical rules, the information in this article is presented for informational purposes only. Nothing should be taken as legal advice. Reading this article does not form an attorney-client relationship with us. An attorney-client relationship is formed through a signed engagement agreement. If you would like further information, Better would love to help you out! Feel free to reach out with any questions.