Amidst the longest government shutdown in history, more federal employees are going without deserved pay than ever before. But even a functioning government can't guarantee that an employer will pay its employees on time. Payroll is a federally (and in many cases, state) regulated process with defined rights and restrictions. However, there's just enough leeway in the law for employers to try to skirt around workers' rights.
Don't be mistaken; here's a rundown of what to do if your employer doesn't pay you on time.
1. Be firm: You're legally entitled to be paid "promptly"
Federal laws don't regulate how often employers are required to issue paychecks. Almost all state laws dictate whether employees are paid on a weekly, biweekly, semimonthly, or monthly basis (exceptions include Alabama and South Carolina), but the government's Fair Labor Standards Act clearly states that workers must be paid "promptly." The law doesn't prescribe a specific measurement of time, but specifies that employers must issue either cash or a "negotiable instrument" (like a check) by the soonest pay period possible. In addition, no portion of an employee's pay may be forcibly withheld without cause.
Address the issue with your employer in writing, using any and all available channels to lodge formal complaints and obtain documentation of any violations of federal law. If your employer refuses, you could bring the issue to your state's labor agency.
2. Record everything
Like all legal matters, documentation provides irrefutable evidence. Lawyers and third parties can draw from all documents detailing the payment agreement between employers and their employees to enforce federal laws. Whether or not an employee is worried about losing pay, every laborer should keep their own records, especially the dates of any missed pay days or other payment violations.
3. Contact U.S. Department of Labor
If an employer has violated a worker's right to be paid on time, then depending on one's state, the employee should contact the state labor division or the federal Wage and Hour Division. The Fair Labor Standards Act is upheld by these departments, which enforce a range of laws that regulate everything from how records are kept to how withholdings must be itemized on pay stubs. These departments will also hold employers accountable to laws forbidding them from changing pay rate without notice, docking pay, or withholding pay.
4. You have the right to back pay
If an employer delays payment or underpays an employee, that laborer is entitled to back pay in the amount of the owed difference. If an employer refuses, the worker has the right to file a private suit in small claims court for back wages, in addition to court costs and attorney's fees. The Fair Labor Standards Act even enables the Secretary of Labor to sue on the employee's behalf.
5. Use emergency fundsOf course, having money put away is a luxury if you're able to earn disposable income. An employer not paying on time is only one instance in which emergency funds are necessary in order to stabilize your home and food security. For those who aren't able to accrue personal savings, there are hardship withdrawals, an option to take funds from employer-sponsored retirement plans (like 401(k)s, 403(b)s, or 457 plans) without paying a penalty. Some plans offer this option in instances of "immediate and heavy financial need." Depending on your plan and your employer's restrictions, the amount you're allowed to withdrawal will vary. Check with your plan administrator to apply for a hardship withdrawal.
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When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.
Frugal gifting often gets a bad reputation. However, this shopping method does not make you cheap — it makes you practical. Frugal gifts often avoid waste and overspending and can be just as meaningful (if not more so) as any other present.
With the National Retail Federation predicting each consumer this holiday season to spend upwards of $1,000 on holiday gifts amidst an economic recession —this year might be the perfect time to reconsider your spending budget. We've formulated the ultimate list of frugal gift-giving ideas to get you started.