Salaried non-exempt employees
Randy L
4 Posts
Can Salaried non-ex employees be paid 1/2 time for overtime or must they be paid 1 1/2 time always under the new regs?
Comments
I just mailed out 14 letters to exempt ee's who will no longer meet the salary test after 8/23, advising them they will be salaried non exempt.
In the case mentioned, I am assuming that the non-exempt status is not a question.
So being salaried non-exempt makes them eligible for time and a half for any hours worked over 40 in the workweek.
I wonder if maybe my question just wasn't worded clearly. Salaried non exempt staff are to be paid their base salary for any week they work 40 hours or less, and must be paid overtime at a reduced rate for any hours worked in excess of 40. For weeks when hours worked exceeds 40, the formula is;
(base wkly salary/total hours actually worked)/2 = overtime rate for that week
I am feeling SO MUCH BETTER! x:)
Do I understand this correctly? If you work a salaried non-exempt person more hours than 40, their rate of pay after the 40 hours actually goes down??? If this is correct, this is counter-intuitive to me. I can tell I need to visit this in much greater detail - back to studying the regs for me.
>(base wkly salary/total hours actually worked)/2
>= overtime rate for that week
>
So by following this formula, if you have an EE that makes %500. a week and he works 50 hours, his rate for the 10 hours of OT would be $5.00??
(500. / 50) = 10. / 2 = 5. = overtime rate
If that is so then we would sure have a hard time getting any of our salaried EEs to work over 40.
Salary is $500/week.
Week 1 works 40 hours, hourly rate is $12.50
Week 2 works 50 hours, hourly rate is $10.00
Week 2 overtime rate is $5.00
Week 3 works 32 hours, hourly rate is $15.63
Week 4 works 48 hours, hourly rate is $10.42
Week 4 overtime rate is $5.21
The staff on sal/non exempt still get their regular base pay for up to 40 hours, so no matter how many hours they work, they get at least their regular base weekly pay.
When they work more than 40 hours, they are paid their regular base weekly pay plus OT at the reduced rate. Yes, the more OT they work, the less their time is worth when working overtime.
When I first heard of this, I just couldn't believe it was legal because it's REALLY cheap overtime labor, so I called the DOL directly to get the answer. The upside for the employee is they are still paid their weekly salary if they work less than 40 hours.
Fortunately, there is no downside for the staff I am converting to sal/non exempt. They've been paid as exempt all along and now they will be paid at least SOMETHING for the OT they work. Not a heck of a lot, but it's more than they WERE getting.
Have I clarified the issue or muddied it?
(i.e. in example above, person is paid $500 a week. Works 50 hours. You have already paid them the $10 a hour for the 10 hours of overtime ($100 of their regular salary is for the 10 hours of overtime they worked). Now you owe them $5 x 10 or $50 more.)
E Wart
1. salaried with a fixed 40-hour work week
2. salaried with a fixed work week of less than 40 hours
3. salaried with an irregular work week
4. semimonthly, monthly, job/day rate, or piecework methods.
Verbiage from the #3 item:
"Employees who are paid a salary and whose hours vary from week to week receive an overtime premium calculated as follows: For each hour worked over 40, add one-half the rate per hour for that week. The rate per hour is the weekly salary divided by the actual number of hours worked in the work week. For example, a $400 per week employee earns $8 per hour in a 50-hour week. Half this amount, $4, is the overtime premium per hour. With 10 hours of overtime, the employee recieves $40 in overtime pay in addition to his or her salary."
I had not thought of the "one times their pay" part you mentioned in your post. By wording your response that way, you helped take my focus off the idea that I thought someone could be making less than minimum wage for overtime hours and redirected my focus on the idea that through the salaried pay basis, the worker is only due the half in the time and a half because they are already getting the time part.
If I sound like I misunderstand, please clarify for me some more. My denseness surprises even me sometimes, but I will eventually "get it" and then have it for life. With the FLSA changes, we are re-evaluating positions. To fix some questionable designation (currently classified as exempt), we will probably designate some salaried nonexempt workers for the first time. Since the concept will be new to our organization, working out the overtime calculations will probably fall under my troubleshooting umbrella. I don't know right off that any of the folks in question work variable schedules, but we do have a lot of variable schedules in our organization so they may.
Thanks,
Remember that there are different "methods" which are approved by FLSA of figuring OT. One such method allows the salary to be paid "...for all hours worked...." To utilize this method, employer must make clear, prior to using this method, to all impacted employees that the salary they are paid "includes payment for 'all time worked' within the workweek. If this method is used, then the "salary" actually covers the 'straight time' portion of the O/T requirement. Thus, the additional amount owed to the employee(should the employee exceed 40 hours in any workweek)as O/T payment would be "1/2" of the calculated weekly rate (using the formula ...salary amount/# of hours worked/2). The time and one-half rule has then been met.
And, as mentioned initially, there are "other" approved methods of calculating O/T which are designed to meet specific business/industry issues.
If one of the alternative methods for calculating OT is used for salaried nonexempt, especially in a variable work week situation, how does an employer ensure that a minimum wage violation has not inadvertently occurred on the weekly salary?
1. Make sure that employees understand, up front, that the salary they receive covers "all hours worked" in the workweek. This phrase should be stated in your pay policy and in other communication to the employees.
2. Make sure that both employer and employee understands that regardless of the number of hours worked during the workweek, the "salary" does not fluctuate.
3. And, the "salary" should be enough to ensure that the average hourly wage rate does not fall under the statutory minimum wage rate ($5.15).
4. Finally, DOL likes to see (if they should inquire at all) that the employee's workweek does in fact fluctuate over 40 from time to time.
Your question is a good one in that it is necessary to re-calculate the wage rate "each week" the hours worked exceed "40". I know that you are excited about that task but unfortunately, it is necessary.
Hope this helps a little.
I found a few more references on alternative methods for calculating overtime. Although the changed FLSA is causing some extra work for me at a very bad time, the extra research is forcing me to learn some stuff I didn't know.
I still do have a question about ensuring that minimum wage rules are no violated if a nonexempt employee is being paid on a salary basis and works variable hours during a work week. We have about three employees whose annual wage is around $16,000 but who have been classified as exempt up to now. I'm not sure the exemption was correct, but I know under the new guidelines it won't be. Anyway, it looks like our options are to raise the employees' wages to $23,660, but they still won't satisfy an exemption test based on job duties, or pay overtime. All three are working in situations where their hours may vary. With a reclassification to nonexempt, our options are then to pay them by the hour as hourly nonexempt or leave them on a salaried basis and pay them as salaried nonexempt. The simple method for calculating OT will be to determine their hourly rate based on their present salary and pay 1 1/2 times accordingly for hours over 40. I am sure to get the question, however, about alternative means of calculating overtime, and I don't have an answer for the 1/2 time example that started this thread. So, can anyone help me figure out how to not violate minimum wage rules in a variable-hour setting. In our $16,000 salaries, the employee could work up to about 59 hours and we'd be OK, but if the employee ever worked 60 or more, the hourly rate would drop to below $5.15 for the week and we'd be in violation for the week. Am I missing something or making this harder than it has to be?
Thanks
Or... Does the OT pay itself actually have to be at least 1.5 X 5.15, or is it just the total week's pay that can't be less than 5.15/hour?
I'm not sure I am right about this, now that you've raised the question.
This is hard to discuss in writing - times like these I wish we were all sitting in a room together. We would have resolved the issue by now. x:)
Either I don't understand your scenario, or it seems counter intuitive to the salaried basis of pay. If I use our situation of an employee making $16,000/year, keeping the employee on a salaried basis means that the employee earns $307.69/week regardless of the number of hours worked. And a variable work schedule implies that total work hours will vary below and above the magic 40 hour number in any given week. If we choose the 1/2 OT rate for salaried nonexempt and the employee works 60 hours, we will pay $307.69 for the week + $3.84 x 20 hours. In that example, have we satisfied the minimum wage requirement because the employee will ultimately be paid $384.49 for 60 hours ($6.41 per hour for the week), or have we violated minimum wage because the employee earned $5.13/hour based on the salary amount ($307.69 / 60)? And as another forumite noted in a prior posting, we recalculate wages every payroll period to ensure that minimum wage is satisfied? So, which calculation is the correct weekly calculation to make?
I know this probably sounds like a tedious detail to most who may read this post, but my experience in my present company is that if there is an obscure detail out there, it will apply here. Our position in question happens to be an apartment manager in a small apartment building. There are no subordinate employees, so the executive exemption cannot apply. There is no association with overall corporate policy or customer advice, so the administrative exemption cannot apply. The only other one that comes close is a professional exemption, and there is no requirement for extensive training in hotel management. It's just not that big an operation, and different staff take care of funding/financial resources. There is a provision for onsite room & board for the employee filling the position (valued and counted as taxable income), and the biggest requirement is that the apartment manager be available around the clock in case there is a resident emergency. We are a retirement community housing an aged population, so many of our residents need general assistance with some of life's simple chores. As resident progress through the continuum of care from independent living to dependent living, they will pass through our apartment buildings for a time on their way to assisted living and then to nursing home. In our two apartment buildings, the apartment managers are designated service providers for managing housing accomodations at that stage of care. Service support staff manage medical/social needs.
Thanks,
total weekly earnings (base salary + OT earnings) divided by # hours truly worked.
So, stilldazed, your math makes sense. Now you can see why I got out of accounting as soon as the opportunity presented itself! x:)
Our lowest paid person in the salaried non exempt category makes the equivalent of $8/hour base pay, so they'd have to work at least 78 hours in a week before reaching minimum wage.
We'll still need to check weekly, but the likelihood of violating minimum wage is, well, minimal.
x:)
I knew I had a strong dislike for accounting in school. It was one of those subjects I took only because it was required for the degree, and I avoided it like the plague otherwise. If accounting was my profession of choice, I probably would of implemented a Plan B a long time ago. Leaving accounting as an HR professional may be trickier. I'm only involved around the fringes to troubleshoot issues, i.e., FLSA & payroll. My boss will probably misunderstand my intention if I suggest our Accounting Dept. actually take over the troubleshooting role, and I may get releived of more of my duties than I intend.
Thanks, again, for the help. You certainly helped clear the air for me some.
We're using the following exemption test criteria:
Executive exempt must make $23,660 or more per year (salaried basis); have a primary duty of management and be in charge of a bonafide business unit, division, or department; customarily & regularly direct the work of 2 or more FTEs (total equivalent of 80 man-hours per week); and have authority to hire/fire or influence such decisions.
Administrative exempt must make $23,660 or more per year (salaried basis), have a primary duty of nonmanual work *and* be directly related to overall company management policies or general business operations of the employer or the employer's customers; and customarily & regularly excercise discretion/independent judgment on matters of significance to the whole organization.
Professional exempt must make $23,660 or more per year (salaried basis), have primary duties that require advanced knowledge/academic training (& preferably have a degree and be working in the field of study), and customarily & regularly exercise discretion and independent judgment on matters of significance to the whole organization.
You can make an assessment of your office manager position better than anyone of us as you are probably very informed about the position's job duties, but from the outside looking in, I would question whether the department is a bonafide business unit/department and whether the two subordinate workers are working a total of 80 hours per week in the context of the executive exemption test, or whether the position works directly with overall corporate policy to determine whether the administrative exemption will apply. With access to no more info than your post, I would look at professional exemption last.
If you can't make an exemption fit your position, and you may not be able to, your company can still pay on a salaried basis, call the position salaried nonexempt, and pay OT at the rate of time & a half for all hours worked over 40 in a single work week. You can even elect to pay 1.5 x all hours over 8 in a single day, though it is not a requirement of the standard rule, as long as your adopt a practice and follow it consistently. Prior discussion in this thread is for salaried nonexempt position, presenting one of a handful of potential alternatives for OT calculations.
We happen to be a single-location employer. The hitch for me is that while we employee nearly 500 people, we encompass a very wide range of services as a retirement community, have countless departments with 6 people or less, and a are heavily represented by PT employees (nearly 1/3 working a myriad of shifts). It's hurting us on the FTEs part of the exemption tests.
Things getting clearer for you?