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Auditing of Employee Compensation

You are the office manager of a small sales company. There are formally three employees with the company: the owner, the receptionist and you. The company hires part time sales reps who sign a contract stating that they are independent contractors. They are supposed to go door to door and make prepared sales pitches for people to purchase the product. There are required to obtain signatures to contracts and to drop of the contracts with initial deposits at the company's office each Monday. Twice a month they meet at the local Starbucks to discuss sales, new product lines and other issues with the owner and the other sales reps.

You receive a notice from the state Department of Labor, asking to do an audit. They want to determine who is an employee and who is not and whether everyone is being compensated properly. The owner has gone away to whale watch off the New England Coast and has told you not to call him, even in an emergency. You try to call him but you cannot reach him.

How do you handle the issue of the audit and what do you say about the sales reps?

On the same day as the audit is occurring, one of the sales reps calls you on his cell phone to report that he cannot make the weekly sales meeting and to give you his sales figures. As he is doing such, he hits a person crossing the street. Several weeks afterwards, the sales rep tells you that he has the lowest amount of car insurance and wants to know whether or not the company will provide coverage for the accident.

How do you handle all of these issues?

Solution Preview

First and foremost, the audit will occur regardless of the approach taken by the company. Therefore, the office manager should ensure that all documents are available to the Department of Labor and that any requests made by ...

Solution Summary

The solution discusses auditing of employee compensation.