AFC Wage & Labor Compliance Tips

It is not uncommon an AFC Home owner is subject to an audit from Wage & Labor. Whether it is from an employee complaint, issues in an industry such as Adult Foster Care Homes or an exploratory mission directed by Wage & Labor, knowing the rules can reduce or eliminate the severe penalties and payment of back wages to employees.

Although many Adult Residential Homes pay far above the new Michigan 2023 minimum wage, knowing how the new rate affects caregivers pay, especially salaried or live-in staff, can reduce feelings of panic and fear.

                             Caregiver Payment Guidelines

Are AFC Home Managers exempt from overtime pay?

• Many Adult Foster Care Home owners like to claim a Facility Manager is exempt from overtime pay because they meet executive employee exemption qualifications. Although many managers are responsible for hiring and firing and managing two additional support staff, they still provide senior care or foster care for adults with disabilities as part of their duties. Wage and Labor overtime exemptions only apply to Manager’s with a primary duty to manage employees.

How do I calculate salaries caregiver pay?

• Many adult foster home providers choose to pay their staff by salary versus hourly rates. In these situations, correctly calculating the amount that meets Residential Care Facilities Wage & Labor standards is critical to prevent back wages and penalties if there is an audit.
• If a caregiver works 40 hours or less in a week, simply multiply an hourly rate which meets or exceeds the minimum wage requirement by the # of hours typically worked to calculate the salary amount.
• If a caregiver typically works more than 40 hours per week, multiply the first 40 hours by an hourly rate which meets or exceeds the minimum wage requirement. Add to this value the amount of half time for the remaining hours over 40 worked to determine the salary amount. Example: A caregiver typically works 48 hours each week. The hourly rate you used to calculate the salary amount is $13/hour. 40 hours times $13/hour = $520. Add to this amount 8 hours at time and a half=$13/hour + $5.05 (half time of minimum wage amount)=$18.05/hour times 8 hours overtime=$144.40. The salary amount to pay is therefore $664.40 per week for 48 hours of work.
• ALWAYS show overtime hours contributing to the salary amount separate on a pay stub to reduce your workman’s compensation premiums.
• ALWAYS maintain accurate payroll and weekly time records in case of a Wage & Labor audit.

Can I pay a staff a flat salary amount no matter how many hours they work?

• Only if the salary amount equals minimum wage plus time and a half for the total hours worked over 40 hours. 
• Very often, AFC owners will calculate a salary amount for the typical # of hours worked in a week then add to it additional hours at time and a half for weeks when they work more than their standard scheduled hours.

What is a sleep deduction?

• For caregivers that work on site for 24 hours at a time AND can sleep at night, Wage & Labor allows for an 8 hour sleep deduction from their pay.  The sleeping quarters must be a bedroom or in a lower house level with proper egress, not a common area. 

Can I take a living credit deduction for staff that lives on site?

• Yes. As long as it meets Wage and Labor Field Operations Handbook requirements detailed in Section 30 C.

Sleep Better at Night

Running your AFC home can feel difficult at times, but it doesn’t have to. Paying AFC staff may seem complicated and may strike fear of Wage & Labor penalties and back pay if done incorrectly. When you follow the guidelines set by Wage & Labor and know how to calculate the minimum rates to charge to cover payroll, your overhead and yourself with a profit, you can sleep better at night.

For specific Wage & Labor questions for your Adult Foster Care Community, contact the Wage & Labor Help Line at 616-456-2004.

If you struggle with understanding what to charge for minimum rates  to cover payroll, your overhead and yourself with a profit, Care Provider Solutions can help. Contact us for a free adult foster care home business consulting appointment.