The compensation structure is going to have to be included in the employment agreement. See Unit 14 for types of compensation methods. Be sure to answer in the contract when, if at all, salary will be renegotiated or increased. Also, can a person’s salary be reduced if the company is struggling or is in financial distress?

If employees file complaints with the Wage and Hour Division (“WHD”) of the Department of Labor, the WHD may choose to conduct an investigation looking into an employer’s compensation practices. The WHD also selects certain types of business or industries, specifically low-wage industries, to investigate compensation practices. A WHD investigator will review how employers pay their employees and ask to see records, such as payroll and time records. The purpose of these investigations is to determine whether employers have properly classified employees as exempt or non-exempt and whether minimum wage and overtime obligations are met.


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To the extent possible under law, Samantha Prince has waived all copyright and related or neighboring rights to Entrepreneurship Law: Company Creation, except where otherwise noted.