Exempt or Non-Exempt

NOT JUST PAYROLL

To be Exempt vs. To be Non-Exempt

(Or, Can I Pay This Employee With Comp Time Or Other Forms Of Pay?)

 

May 2011

The following information is meant as general information and is not intended as legal advice. For the best information on Fair Labor Standards Act (FLSA) wage requirements go to www.wagehour.dol.gov.  

 ***Employers are responsible for ensuring that their employees are properly classified and paid according to their classification. ***

Can I pay this employee with *Comp time or other forms of pay? No and yes. According to the Fair Labor Standards Act, Non-EXEMPT employees must be paid at a rate of at least time and one-half for work over 40 hours in a week. (Some states have requirements that are stricter than the federal one and employers must abide by the stricter requirement.) It is unacceptable under any circumstances to pay Non-EXEMPT employees with Comp time for overtime worked.

EXEMPT employees are under a different classification with different requirements than Non-EXEMPT employees. The EXEMPT employee’s salary should already be sufficient to compensate for working whatever it takes to ‘get the job done.’ However, if you want to pay your EXEMPT employees something for working more hours in a week than scheduled, you may, but you might unintentionally re-define them as Non-EXEMPT if, alternatively, you pay them less for working fewer hours in a week. It does not affect the EXEMPTION to pay an EXEMPT employee more than the agreed upon salary; but the EXEMPTION may be affected if paid less than. So, yes, an employer may pay EXEMPT employees with Comp time or other forms of pay if the pay is at least the agreed salary for the week that also meets the FLSA threshold of $455 per week.

The DEFINITION of an EXEMPT employee includes the requirement to pay EXEMPT employees on a salary (or fee) basis, which means paying a pre-determined amount that is all or part of the EXEMPT employee’s compensation for the pay period. This pre-determined amount means that it is set or fixed and cannot be reduced based on the quality or quantity of the work performed.

The amount of salary is also part of the DEFINITION of EXEMPT and must be at least $455 per week for any work in the workweek regardless of amount of time worked or quality of the work. So, if your EXEMPT employee works one hour, 40 hours, or more than 40 hours, he/she is due at least the agreed salary for that week.

Another piece of the definition of an EXEMPT employee is that they must meet strict FLSA criteria and standards. This article is not meant to explain the classifications but in short, the main EXEMPT categories are executive, administrative, professional, and computer-related. Go to www.wagehour.dol.gov for official information on what constitutes an EXEMPTION from FLSA. You may also find general information about this topic in a future Not Just Payroll More Than Resources’ article at www.notjustpayroll.com.

In addition to allowing Comp time under the circumstances stated above, the EXEMPTION may also remain intact if an employer pays an EXEMPT employee any amount, or provides other things of value for hours worked over a certain number such as 40 in a week. This practice is acceptable if again, pay is not reduced for working fewer hours. If pay is reduced the employee may now be in the Non-EXEMPT classification and due overtime pay for time worked over 40 hours in a workweek. AND, if an employee is Non-EXEMPT, then Comp time is not acceptable as overtime pay.  

Similarly, the use of Leave Without Pay may also jeopardize the EXEMPT status of an employee if an employer reduces the employee’s pay in a workweek for working less than scheduled. However, if an EXEMPT employee performs NO work in a workweek, the employee is not entitled to pay for that workweek. Having a Paid Leave Policy does not negate the EXEMPTION, if the paid leave replaces pay for absences and thereby does not reduce the EXEMPT employee’s salary for the week.

An employer might think that since they must pay the same amount per week no matter the actual hours of their EXEMPT employees, might mean the employer cannot require the EXEMPT employee to work a schedule. However, requiring an EXEMPT employee to work a schedule (such as, posted office hours) is acceptable and may not affect the EXEMPT definition. You may also find general information about what to do if an EXEMPT employee is not working the required schedule in a future Not Just Payroll More Than Resources’ article.

Again, for official information on EXEMPT vs. Non-EXEMPT go to www.wagehour.dol.gov.

                 TIP - Employers may use a bonus program if they wish to provide their EXEMPT employees something for working extraordinary hours.

If you would like to consult with Not Just Payroll to assist your company with classifying employees, developing and implementing a bonus program, developing and implementing policies, conducting local salary surveys by position, or assisting you with any other human resource management question you might have, we are happy to help. Give us a call at 505-872-1880. We offer one time consultations, or by project, or on a retainer-basis as things come up. Email us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it to set up a free consultation TODAY!

 * Comp Time – Comp Time usually means the exchange of time off for overtime worked on an hour for hour basis.

Thursday, May 25, 2017

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To Exempt or to Non-Exempt?

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