Salaried to Hourly and back again

jakech · August 2002

Maybe I'm missing something here. A local privately held bank pays it's employees(non-exempt)a weekly salary. If they work over 40 hours they are paid at 1/2 the equivalent hourly rate based on the 40 hour salary. Does this not go against FLSA. I mentioned the nature of the business because that is the justification the bank gives for this arrangement. They claim that because they are privately owned they can do what they want. Finally, when it is beneficial to the bank, they convert the employee to hourly; for example when they are attending school and not working 40 hour weeks. I just don't see where this is within the parameters of the FLSA. Any input?

Hatchetman · August 2002

[font size="1" color="#FF0000"]LAST EDITED ON 08-08-02 AT 06:29PM (CST)[/font][p]A "salaried, non-exempt" status is permitted under FLSA. It means that an emplyee receives a regular salary for the week, and since the hours worked are covered by that salary, then the half-time aspect is what then needs to be added on to the salary. There's more to it because this payment method involves "fluctuating hours." Take a look at the FLSA-permitted methods for paying overtime to non-exempt employees who are salaried at 29CFR778.113 (with a consistent number of hours per week) and 114 (with fluctuating hours).

[url]http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=29&PART=778&SECTION=113&YEAR=1998&TYPE=TEXT[/url]

[url]http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=29&PART=778&SECTION=114&YEAR=1998&TYPE=TEXT[/url]

Carol CA · August 2002

It doesn't matter if they are privately held or not - they need to follow the state wage and hour laws. Whether or not someone is exempt or non-exempt depends on the job they do - not on whether they are working over or under 40 hours in a week. You cannot flip flop from salaried to hourly and back again.

Sounds like something is fishy over there.....

moneyman · August 2002

I think that there is still confusion using the terms "salaried" and "hourly" in this issue. As Hatchetman stated, you can have salaried non-exempt, which means that you pay a salary, but still MUST make adjustments for actual time worked (meaning overtime or deductions).

We used to do that, but employees found it very confusing. We paid semi-monthly and everyone started with a "base" pay, then we collected time sheets and adjusted for any overtime worked, vacation taken, or unpaid leave. This never changed their status as non-exempt employees even if we had to adjust their pay one period and not the next and back again the next. If they worked 8 hours a day, each day during the period, they received the base pay, no adjustments. However, if one day they worked 9 hours, they were paid OT for that extra hour. I think perhaps another confusion is that the bank says they pay 1/2 the regular wage for the hours over 40. I learned in a payroll seminar that what I thought of as OT (1 1/2 times the regular rate) was actually a wrong term. The OT only applies to the extra, the 1/2 over the regular rate because it was considered that you paid the regular rate for all hours, then the OT rate of 1/2 on only the OT hours.

Don D · August 2002

This is actually allowed by the FLSA. Eight years ago I first heard of it when I learned such employees were actually receiving only 'half time' for the extra hours worked. The loophole that the company thought they enjoyed was there because the employees 'had already been paid for the "time" and now only needed to be compensated for the "half" thus "time and a half". I thought it was insane but researched it and found it to be OK according to the law. The figures used below will show you how old this explanation is that I found in Commerce Clearing House, Inc., "The Answer Book on Federal Law". {Example: If an ee is hired at a rate of $5.00 per hour, this is the regular rate and the overtime rate would be $7.50 in the absence of additional compensation. Suppose that the employee is hired for a weekly salary of $200 for all hours worked and the ee works 45 hours in one week and 50 in another week. In each case, the regular rate is different. The regular rate for the 45 hour week would be $200/45=$4.44. Since the ee is already being paid straight time for the full 45 hours under the salary agreement, the er would only have to pay additional HALF TIME for the extra five hours. That would be the regular rate $4.44/2=$2.22 times 5 hours = $11.10 in overtime. Total pay for the week would be $211.10.

The ee's regular rate for the 50 hours week would be $200/50 = $4.00. The required additional payment for 10 hours of overtime would be the regular rate of $4.00/2 = $2.00 times 10 hours = $20.00 in overtime. Total pay for the week would be $220.00} WHEW!

Although this was a decision by the CFO passed down to Accounting and Payroll, it was the job of HR to explain this c- - - to every ee who brought his/her check down to us with a frown. The decision to pay this way, I thought, was insane, although legal. The amount it saved the company in overtime payments paled in comparison to the huge negative morale' factor, not to mention all the time the company paid HR to sit and try to explain this madness. x:-(

Salaried to Hourly and back again

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