Hourly, Non-Exempt, and Exempt Status
Most employees are paid by the hour and overtime rules apply as stated above. They punch a time clock or swipe a timecard each day and usually follow a schedule, unless they are on one of the alternative work arrangements highlighted in Chapter 19. They are paid overtime based on federal or state law, but some employees have a salaried status and are considered salaried non-exempt or salaried exempt. The exempt part refers to whether or not they are exempt from overtime.
According to U.S. Department of Labor provisions, a salaried nonexempt employee is one who is paid a weekly salary to perform a job. The salary remains the same if the employee works under forty hours during the work week. However, if he works more than forty hours, he is subject to overtime. This arrangement is an advantage to the employee because they do not need to work a minimum amount of hours each week to receive their full pay. However, if they work over eight hours in a day or forty hours in a week, they are entitled to overtime (based on which overtime law the state recognizes). Perhaps the only advantage to this status for the employer is that it makes payroll processing easier because the employee is paid the same salary each month. As long as the employer eliminates overtime, there is no added expense.
Time cannot be docked from salaried non-exempt employees for working a partial day. If you are going to designate this status to workers, find out the federal and state requirements for handling full days off of work and the proper use of paid leave. There are only a few instances when pay may be docked for missed work.
A salaried exempt employee is not eligible for overtime wages. Workers with this employment status are paid to do a job in whatever time it takes, whether it's thirty hours in the workweek or seventy. Be extremely careful before giving an employee this pay status because improperly classifying an employee may result in stiff penalties.
An exempt employee is usually an executive, manager, or professional. Some people who work in outside sales or computer technology may be eligible for this classification, too. But it's not the job title that determines if the employment status is exempt from overtime; there is a “duties test” for the position that determines whether or not the position is eligible.
Contact the U.S. Department of Labor to determine if an employee's job duties qualify for salaried exempt status. Generally, the employee will need to supervise at least two people, have the ability to make important business decisions, perform management duties during the majority of the workday, or a combination thereof, among other things.
Employers need to beware that scheduling managers to work shifts normally assigned to hourly employees on a regular basis can have stiff consequences. There was a recent class action lawsuit brought against a fast food chain because managers spent too much time running the cash register and cooking food. As exempt employees, the majority of their working hours should have been spent in administrative work.
There are also salary requirements that must be met before an employee can be classified as salaried exempt. Currently, employees must be paid at least $455 per week in order to qualify. With the federal minimum wage increasing, there is a chance that this figure will rise as well.
The rules for deducting pay for time not worked by salaried exempt employees is similar to that of the salaried non-exempt employees mentioned above. If a full day of work is missed due to a personal reason that does not include an illness, you may be able to deduct the wages for the day.
It is customary and reasonable to offer a different benefit package to salaried exempt employees. This may include benefits that are offered only to this classification, or an earlier eligibility date for benefits to begin. It's one of the perks of the additional work hours and the added responsibility required of an exempt position.