Notes

Sharing Best Practices: Pay Practices in the AF USA Network Classification of Workers

a. Teachers in most Alliances Françaises organizations in the USA network

are classified as employees rather than independent contractors (also

called freelancers). This is based on the advice of lawyers across the

network in the past 10 years. Though many factors are involved, the

determination depends mainly on the

amount of control that the employer

exercises. If, for example, teachers are

directed to follow a specific

curriculum, use certain textbooks, hold

classes at a scheduled time and at a

place under the control of the

employer, then those points

demonstrate a high level of control—

the type of control that an employer

exercises over an employee.

b. Individual Alliances have been audited by state agencies (labor,

employment and unemployment departments) in recent years. Those

audits have confirmed the classifications as employees.

c. In one case, a former Alliance worker, who had been classified as an

independent contractor, later filed a petition with the IRS that she should

have been classified as an employee. The IRS agreed and ordered a

reclassification which resulted in fines and payment of back taxes, going

back several years (to the beginning of her employment at the Alliance). It

also triggered a state audit of the organization’s HR records.

d. When workers are classed as employees, payroll taxes are withheld for

FICA (Social Security and Medicare), unemployment, as well as federal,

and state income taxes, as applicable.

e. Payments to independent contractors, in contrast, are done without payroll

tax withholding. The contractors are responsible for paying taxes

themselves on their earned income.

f. For annual tax reporting, employers are required to issue Form W2s to

employees and Form 1099s to Independent Contractors. (Google “W2 due

dates” and “1099 due dates” to make sure you adhere to the annual

deadlines, which are generally in January and February.)

g. In some instances, it is argued that a worker can be classified as an

independent contractor, especially when they operate their own business

simultaneously or when they operate very independently of the on-site

controls at an Alliance.

h. Workers should be designated as either independent contractors or

employees, but not both. One Alliance paid a part-time school manager as

an employee for 10 months of the year. The same person wanted to take

summers off to lead group tours to France, on an independent contractor

basis (managing that program independently for the Alliance). This was

uncovered during an audit and the Alliance was subsequently ordered to

cease the practice.

Notes

i. Alliances are advised to check with local legal and business practice

advisers to verify proper classifications.

Employee Types – Hourly or Salaried a. Teachers who are classified as employees can be paid an hourly rate or a

fixed salary. The Alliances USA network has a mix of both, but hourly

pay for teachers is the most common practice.

b. Salaried positions offer the benefit of regular, predictable monthly

paychecks. Salaried employees generally are offered for more benefits (at

the discretion of the employer).

c. Note that salaried employees can take unpaid time off—a leave of

absence—such as for summer travel to France.

d. Having hourly employees can allow the organization more flexibility to

respond to increases or decreases in demand for labor.

e. Alliances can have a mix of hourly and salaried teachers. In some

organizations, the two types co-exist comfortably. In other Alliances, the

practice led to two “classes” of teachers, and was deemed to be negative

for morale.

f. Note that salaried teachers/staff need not be full-time. Contracts with

salaried teachers can specify work hours of 30 hours per week, for

example. The employee might teach 18 hours per week (a mix of group

classes and private lessons) with the remainder of time spent on specialty

tasks such as curriculum development, qualifying prospects, or overseeing

exams.

Payroll Frequency & Rules a. Some Alliances pay monthly, while others pay every two weeks.

b. Each state has regulations that govern paydays. For example, here are the

rules for one state:

“Employers must establish

and maintain regular

paydays. Paydays may not

be more than 35 days

apart. Employers may not

withhold or delay

paychecks as a form of

discipline. In the case of

an underpayment (mistake

where more is owed to the

employee), the employee

must be paid the undisputed underpaid wages regardless of the cause of

the underpayment. When the underpayment is less than five percent of the

employee’s gross wages, the amount may be paid on the next regular

payday. If the underpayment is more than five percent of the gross, the

amount must be paid to the employee within three business days. In the

case where an employee fails to submit time sheets in a timely manner, it

is still the employer´s responsibility to track hours worked and to pay all

employees on regular paydays.”

c. Bonuses for employees are always handled within the payroll system since

taxes must be assessed on bonus pay, just as they are with standard pay.

d. Check the rules in your state to make sure you are adhering to local

regulations.

Notes

Payroll Scales and Types – for Teachers a. Pay strategies and scales in the Alliances Françaises USA network range

from very simple (flat hourly rates with no variations) to very complicated

(multiple rates of pay).

b. Alliances pay with different scales depending on any mix of factors, the

primary ones being: a) level of experience, and b) level of education

(teachers with Masters or PhDs in FLE may be paid more than ones

without degrees or with other degrees).

c. The cost of living in each region and competitiveness of pay (compared to

other local teaching institutions) are sometimes factors.

d. A few Alliances pay more for teachers who work on Saturdays and

evenings. Some pay different hourly amounts for Skype lessons and

corporate lessons off site, etc.

e. Some Alliances pay a higher rate to teachers in their Children’s programs.

f. Some Alliances pay a standard “active” teaching rate and well as

secondary rates for non-teaching activities (such as attending a meeting,

supervising a testing session, or attending a training session). Note that

some HR lawyers frown upon multiple rates of pay for the same

individual.

g. In most Alliances, teachers are paid the same hourly rate, regardless of the

number of students in a class. The assumption is that some classes will

simply have more students and some will have less. The same teacher

might have 5 students in one class and 10 in another – his/her hourly rate

of pay is the same.

h. A recent survey (in late 2016) showed that average teacher pay across a

sampling of Alliances was $25-27/hour. On the lower end and particularly

for novice teachers, the pay is less (for example, $21).

i. Some markets justify higher-than-average hourly wages, particularly when

demand for qualified teachers is high and supply is low. Note that higher

hourly wages typically translate into higher pricing for clients and lower

operating margins for the organization.

j. In some Alliances, a review and recalibration of pay practices has been

required in order to avoid default.

k. In some markets, there is downward pressure on per-hour client-services

pricing, particularly for private lessons, due to the emergence of native-

speaking online tutors at a client cost of as low as $20/hour.

l. Hourly rates of pay for teachers are in some cases increased with seniority

(length of term of service). Alliances may opt to award periodic or year-

end bonuses rather than setting precedents for firm schedules of escalating

hourly rates. This allows the organization a bit more flexibility to adjust or

react to periods of weakened revenue or low enrollment.

Cancelled Lessons Policies a. One Alliance got an HR lawyer’s advice on lesson cancellations. The

question from the

employer was, “If I

book an hourly teacher

to conduct a lesson,

and then the client

cancels (far enough in

advance that I can

notify the teacher not

to come in), then is it

required to pay the

Notes

teacher?” The lawyer replied that “an employer is not required to pay an

employee for hours not worked.” The Alliance established a policy on

cancellations: 1) When customers cancel by 5pm the night prior to a

lesson, and the teacher is notified, then the customer is not charged and the

teacher does not charge for those hours. 2) If the customer cancels after

5pm the prior night, the customer is charged 50% of the lesson fee (which,

from an administrative perspective, helps cover one of the options

available to the teacher). The teacher then has the options to 1) spend that

hour on administrative tasks and is paid a cancellation rate of $20, or 2)

choose not to come in (and not get paid), or 3) take a different teaching

assignment in that same period, or 4) waive the customer’s delinquent

cancellation fee (on an exceptional basis, usually to promote customer

satisfaction in the case of long-term clients).

Payroll Advances a. If an employee needs a payroll advance (or temporary loan), this may be

accomplished outside of payroll, requiring less manipulation of time

sheets and taxes. Example: Teacher anticipates month-end net pay of $2K

for hours worked. In week 2 or 3 teacher requests payroll advance of $1K

to be able to meet pressing obligation. Employer issues advance/loan

check for $1K in week 3. In week 1 of the new month, after receiving his

standard net pay of $2K (and after deduction of taxes), teacher repays the

$1K advance/loan.

b. Employers are not obligated to make such advances, and HR experts

advise that they be done only on an emergency basis. Written policies

should state, for example, that advances are limited to emergencies and to

two per year. Experts also recommend signing of a contract that specifies

the date of repayment.

c. If an employee quits and has an outstanding loan or advance that has not

been repaid, the employer may not have the right to garnish the final

paycheck (check your state’s rules).

Recording Hours Worked a. Most Alliances have timesheets or use employer-submitted Excel

spreadsheets for the hourly teachers to fill out per time period. These have

basic information including description of task (teaching a group class or a

private lesson), start and stop time, and total hours.

b. Some Alliances use online systems to record and track hours worked.

c. Timesheets are also required in some municipalities for tracking allowable

sick-pay hours, where paid sick-pay hours are legislated for both hourly

and salaried personnel, full-time and part-time.

d. Records of time worked, whether digital or manual, must be preserved in

HR files. (Refer to the HR presentation from October 2016, for length of

time.)

Tracking of Private Lesson Hours a. In manual systems, Client Service-

Delivery Records are maintained

by the main office. These show the

number of prepaid hours for the

private-lessons clients, the

projected delivery schedule for the

service, and the actual delivery of

the hours. These sheets are updated

Notes

by the main office with additional paid hours, as needed. On delivery of

lessons, the teacher and client initial the sheet. In some Alliances, to

prevent loss through unpaid lessons, teachers are not allowed to deliver

teaching hours to a customer whose balance of pre-paid hours is

insufficient to cover a lesson. In that case, the office is called to action to

collect on additional pre-paid hours.

b. This tracking and monitoring of the “fees paid/fees dues” for private

lessons clients is automated in some Alliances. Whether managed digitally

or with paper files, it is important to ensure that the accounts receivables

for private-lessons clients are managed efficiently and with ample

communication between the teacher, office staff, and the client.

Filling Out Form W4s

a. The employer is not responsible if an employee fills out a Form W4

incorrectly, and ends up having insufficient tax withholding. That said,

employers can assist new hires (and particularly persons not familiar with

US taxation systems) to understand the impact of selecting lower

withholding allowances.

b. J1 interns and trainees (including ones employed during their OPT phase)

are responsible for paying income taxes but are exempt from paying social

security taxes; the employer does not have to pay the matching

contribution.

c. Employers should verify such, at the time of hiring, to avoid later issues.

In one Alliance, social security was withheld from OPT teachers’

paychecks and then had to be rectified after petitions were made by

teachers, to the IRS. It’s better to address such complications early, rather

than having to refile and refund taxes (processes that can be costly and

time consuming).

d. New employees should understand the ramifications if they don’t include

the correct number of exemptions on the W-4 form. If they give incorrect

allowances, they might well owe additional taxes later. In some Alliances,

teachers were unable to pay accumulated taxes and had to have their

wages garnished by the IRS. On the other hand, if employees make the

mistake of paying the IRS too much through monthly payroll withholding,

they’ll get that money back in the form of a tax refund once they’ve filed

their annual tax return.

e. W-4 allowances can be changed as needed during the year and over the

course of employment.

Performance Reviews a. Employees—whether hourly or salaried—should have performance

reviews on a regular basis.

b. Ideally, criteria should be specific, measurable and documented. Examples

are student retention rates, feedback from in-class observations, etc.

Notes

Expense Reimbursement a. Alliances should require forms that document the reason for the expense,

the date and attachment of actual receipts.

b. Expense reimbursement must have pre-approval.

c. Keep separate files of all employee or board member reimbursements

(reimbursement is not part of payroll). State audits will examine these

files carefully for completeness to ensure that an expense reimbursement

is not used as a way to compensate persons for hours works.

d. Always check IRS guidelines and rate updates for reimbursing miles

driven. You can pay more than the IRS guidelines, but not less.

Payroll Execution & Analysis a. Many AFs use online, automated payroll through services like Paychex or

ADP.

b. Regardless of the method of pay, the payroll data should be entered in the

AF’s accounting software (such as Quickbooks).

c. When the payroll data are divided into categories of management pay,

teachers’ pay, and taxes, this can be useful data for the Executive Director

and the Board. Year-to-year comparisons can then help easily identify

patterns to question or address, such as a simultaneous trend of rising

teacher payroll costs at the same time as declining program services

revenue (or vice-versa). This is particularly important to monitor, since

personnel costs are generally the largest cost center in Alliance

organizations.

Revision date: Jan. 3, 2017 Disclaimer: This document shares guidance from experts but is not a substitute for legal advice. Always consult local experts for regulations that may apply in your state or region.