Indiana Compensation and Benefits

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Wages
Both Indiana and federal law cover various issues regarding wages and hours of work.  Indiana law requires that employees be paid within ten (10) days of the close of the pay period in which wages are earned.  For Indiana employers not otherwise covered under the federal wage and hour law, any employer employing at least two employees during a workweek must also pay the State-required minimum wage of $7.25 per hour.  Indiana law similarly extends the requirement to pay overtime at time and one-half for over 40 hours in a workweek to employers who are not otherwise covered under the federal wage and hour law.  Also, as of July 24, 2009, the federal minimum wage is $7.25 per hour.

For those employers covered under federal wage and hour law, such employers must pay employees an amount that is at least the statutory minimum wage based upon an employee's hours of work in a work week.  For employees who are not exempt from overtime pay requirements under the wage/hour laws, employers must pay those employees additional compensation for overtime hours.  Overtime pay requirements apply to all employees, except those who fall into one of the “exempt” classifications under federal law.  Even certain employees who are paid on a "salary" basis may need to be paid overtime, depending upon the nature and extent of their job duties.

Bonuses and Awards

Written policies should be developed so that employees understand the method by which bonuses are calculated.  Well crafted and written policies are critical to setting forth the details about bonuses to avoid confusion and claims of improper bonus payment calculations.  Furthermore, in designing bonus structures, employers must also be careful in determining whether its employees' overtime wage calculations are affected by bonuses, awards, and other things of value provided to the employees. 

Taxes

Employers are required to withhold Indiana and federal income taxes and social security taxes from taxable wages paid to employees.  A failure on the part of the employer to collect, account for, and pay withholding taxes will subject the employer to significant monetary penalties (both under Indiana and federal law).  Significantly, where there is a failure to properly collect and/or pay over such taxes, both the Indiana Department of Revenue and the Internal Revenue Service can assess personal liability on those "responsible persons" charged with the responsibility for remitting the withholding taxes or managing that responsibility.

Most employers, including nonprofit organizations that are not 501(c)(3) organizations, must also file an Employer’s Annual Federal Unemployment (FUTA) Tax Return (IRS Form 940) and pay any balance due on or before January 31 of each year. Details may be found in IRS Circular E, available at http://www.irs.gov/publications/p15/index.html.  Employers who are 501(c)(3) organizations, however, are not required to file a FUTA Tax Return.  If payment of tax is required, any balance is due on or before January 31 of each year. Details may be found in IRS Circular E, available at http://www.irs.gov/publications/p15/index.html and in Publication 15A.

Mandatory Benefits

Workers’ Compensation
Subject to certain exemptions, all Indiana employers with one or more employees must provide workers’ compensation insurance for their employees.  There is a process by which Indiana employers may self-insure their workers’ compensation obligations, subject to the approval of the Indiana Workers Compensation Board.

If an employee is injured by accident, arising out of and in the course of employment, that employee's exclusive remedy for compensation against his/her employer is under the Indiana workers’ compensation laws for benefits.  Accordingly, that employee is generally barred from suing his/her employer, except in the case of an intentional tort committed by the employer with intent to produce injury.  

Unemployment Insurance

Indiana employers must pay taxes for unemployment compensation under the mixed federal/state system.  In Indiana, unemployment issues are generally dealt with by the Department of Workforce Development.

Other Indiana Laws

Indiana courts have held that earned and unpaid vacation pay is “wages” and must be paid with the final paycheck at separation of employment.  The same is true of earned bonuses and commissions under certain circumstances. 

Also, Indiana courts recognize that employers may implement vacation pay, bonus or commission policies restricting employees’ entitlement to pay on any conditions the employer desires to implement.  Thus, the employer may have language in its written policies making clear that separated employees will not receive pay for any bonuses, vacation, or commissions under specified circumstances.  Employees are not entitled, at separation, to pay for unused sick days unless the employer’s policy specifically provides otherwise.  A terminated employee’s final paycheck is due on the next regular payday on which the employee would have been paid had the employee continued in employment.  There is no requirement for accelerated payment.  Upon written request of a terminated employee, the employer must issue a letter, signed by the employer, setting forth the nature and character of service rendered by the employee, the duration of the service, and the cause, if any, the employee quit or was discharged (this requirement is not applicable to any employer which does not require written recommendations or written applications showing qualifications or experience for employment).

If employment benefits are provided, the provision and administration of such benefits must be handled in a non-discriminatory fashion and are subject to applicable federal laws regulating employment benefits, such as ERISA, HIPAA and COBRA. 

Mandatory Leave of Absence

Federal and Indiana laws regulate certain issues concerning various kinds of leaves of absence.

With certain exceptions, the federal Family and Medical Leave Act (“FMLA”) requires employers with 50 or more employees to provide unpaid family or medical leave of up to 12 weeks in a 12-month period for the birth or adoption of a child, for the serious health condition of the employee or spouse, parent or child of the employee, or for a qualifying exigency arising out of the fact that a spouse, child or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces in the support of a contingency operation. A “serious health condition” includes inpatient hospitalization and subsequent treatment therefore and continuing treatment by a health care provider, including pregnancy. To be eligible for FMLA leave, the employee must have worked 12 months or longer, performed at least 1,250 hours of service for the employer in the 12 months prior to the date of leave, and must work at a site within 75 miles of which the employer has 50 or more employees. If the employee’s need for leave is foreseeable, the employee must provide his or her employer with 30 days notice before taking leave. When the need for leave is unforeseeable, the employee is required to provide notice as soon as practicable.

An individual who believes his or her FMLA rights have been violated is entitled to file a lawsuit. Remedies include lost compensation, liquidated damages, other out of pocket expenses, equitable relief, and attorneys’ fees

Indiana maintains a military family leave law that affects employers with at least 50 employees for each working day during each of at least 20 calendar weeks.  The law provides job-protected leave to certain family members of individuals on active duty in the Armed Forces of the United States or the Indiana Army or Air National Guard.  Eligible employees include:  spouses, parents, biological or adoptive mothers or fathers, brothers or sisters, biological grandparents and court-appointed guardians and custodians.  Eligible employees may take up to 10 days leave from work per year for qualifying circumstances during:  the 30-day period before active duty orders are in effect; a leave provided to the active duty serviceperson while active duty orders are in effect; or the 30-day period after the termination of the active duty orders.  Also, employers are barred from retaliating against or penalizing an employee who elects to take such leave.  To be eligible for such leave, the employee must have been employed by the employer for at least 12 months and worked at least 1,500 hours during the 12-month period immediately preceding the date on which the leave is to begin.

Voluntary Benefits

To the extent that employers choose to offer benefits that are not required by law, it is important that such benefits be provided and maintained in a non-discriminatory and uniform manner.  Further, benefits such as:  retirement benefits, severance pay, or other voluntary benefits may be regulated under ERISA, a federal law that sets forth procedural and substantive requirements.

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