Let’s Just Put Them on Salary

This is a short post to make a short, but important point:

Remember: The default rule, in the eyes of the government, is that your employees are paid hourly, and therefore entitled to overtime. Just deciding to “put the employee on salary” to avoid paying overtime is not how it works. Employers don’t get to arbitrarily choose, who is salaried and who is not – there are specific, and nuanced rules (read, exceptions from the default rule) for making that determination. In other words, only select categories of staff can be paid on a salary basis…here are some of them under the Fair Labor Standards Act (FLSA):

Manager: If the (to be) salaried employee supervises two or more employees, and managing said individuals is a large part of their job description, and they have hire/fire authority (or at least strong input) over these people, they could fall under a manager exemption. But (and its a big one) just slapping a “manager” title on someone does not make them exempt. If, for instance, if the bulk of a shift manager’s job is to do other things besides manage others (as is the case with a ton of retail management jobs) they are likely not exempt and therefore entitled to overtime.

Professional: Some of these are easy to classify (others, not so much). Doctors, lawyers, accountants, and almost everyone making more than $100,000 per year are considered exempt. People who have considerable professional discretion in how their jobs are completed can also be exempt (but making that determination is nuanced, and the crux of the analysis will depend on the job description and actual job duties of the employee in question).

Administrative Professionals: The Administrative Professional exemption applies to those employees who “work behind the scenes” at the Company. In particular, those roles within, finance, HR, and quality assurance are good examples. Assuming, of course, the employees work independently and have decision-making authority over matters of significance at the Company. The keys here are independent, decision-making, and matters of significance. If the employee has to ask permission before they do anything…not exempt.

Outside Sales: These employees call on customers and make sales away from the office. The KEY: If the employee is sitting inside the office making phone calls, they are considered inside sales and are non-exempt.

Whats the take away here? Ummmm….a lotta people should be getting paid by the hour. And, if employees are salaried – that’s OK – but they have to fit into an exemption. As the employer, how do you prove the exemption if asked (*cough* I mean audited)? Better tune up those job descriptions and know what the employee actually does. The job description is a great (and necessary) first step but its the actual job duties that matter.

Thanks for reading.

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