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#1

Exempt vs Non-Exempt  
Posted: 03/23/2011 10:53am   406 Views
   (1 rating)

Please explain the difference between salaried exempt and salaried non-exempt.


Private15151

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 11:25am  
   (4 ratings)

A salaried exempt employee is paid the same salary each pay period, regardless of the number of hours they work.

A salaried nonexempt employee is paid the same salary each pay period for the first 40 hours, and receives time and a half for time worked after 40 (of course, this varies based on state law). Salaried nonexempt are awarded all the protections of a salary (including getting paid the same even if they work 38 hours, cannot be docked pay in less than whole day increments, etc.), and are also eligible for OT under FLSA.

An exempt job must be paid a fixed salary. You can choose to pay a nonexempt job a salary or an hourly rate, so long as the OT is calculated according to FLSA/state laws.


Private10775

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 11:39am   Revised: 03/23/2011 11:40am  
  

Amanda, nice quick answer.

But are you sure about this statement?   "Salaried nonexempt are awarded all the protections of a salary (including getting paid the same even if they work 38 hours, cannot be docked pay in less than whole day increments, etc.), ..."


Private15151

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 11:48am  
  

Thanks, Paul. That's been my interpretation of the difference between paying a nonexempt job a salary vs. an hourly wage. What's your take on it:?


Private10790

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 11:52am  
  

Simply paying someone on a "salaried" basis does not affect their overtime eligibility status in the United States.  As Paul notes, exemption deals with overtime, while paycheck frequency and the degree of stability in hours worked or amounts paid are different topics.  One can be "salaried" non-exempt eligible for time and a half overtime; or salaried exempt receiving voluntary straight time overtime.   Although it can be confusing, believe Amanda is literally correct in most respects based on most conventional practices at most US employers.  Long story short, salaried refers to a fixed pay stipend rather than a rate computed on a constantly varying hourly frequency basis, but being paid a "salary" does not mean that you are automatically exempted from State or Federal overtime rules. 


#2

Exempt vs Non-Exempt  
Posted: 03/23/2011 12:30pm   Revised: 03/23/2011 12:32pm  
  

I agree with Amanda. Companies that put their non-exempt employees on a salary would generally operate as she states and not dock their pay for certain absences or reduce their pay in a short week, but they are obligated by law to pay overtime at 1.5x base for work over 40 hours in a week, as she states. She did a nice job of explaining this status.


Private10775

   
  
Posted: 03/23/2011 12:31pm  
  

Private10775

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 12:32pm   Revised: 03/23/2011 12:35pm  
  

Amanda,

My take is that a "salaried non-exempt" can still be docked for hours of work resulting in a less than 40 hour paid work week.  But I could be wrong, and defer to greater experts on this issue.  For example, if a no-show for 3 hours one day, the employer may only pay employee 37 hours of work for that week. 


#2

Exempt vs Non-Exempt  
Posted: 03/23/2011 12:50pm  
  

They could dock them if they wanted to, but then I'm not sure why you would have them on salary if you did. I believe that Amanda did not say you couldn't dock them, but that most companies wouldn't since they consider them salaried employees. That's how I interpreted her explanation.


Private10775

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 01:07pm  
  

Maybe I just have a different impression of what "salaried" and "hourly" means. 

I see the term "salaried" as being employees on a "variation" time accounting system.  They get paid a set rate that normally doesn't change until the base rate changes.  If pay has to be added (say for overtime) or docked (say for unauthorized absence), the time accounting folks submit a "variation" report.

An "hourly" employee is paid on an "input" time accounting system.  They are paid based on the number of hours that the time accounting folks submit on a "input" report. 

What am I missing?


Private10790

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 01:19pm   Revised: 03/23/2011 01:21pm  
  

You're right, Paul, because that was the way we handled it in The Day when factory non-exempt labor punched the time clocks for their hourly rate paid weekly while salaried non-exempts paid semi-monthly filed exception reports when working more hours or fewer hours than their specified schedule upon which their base "salary" was computed.   But the real question deals with the overtime rate implications of the various legal optional treatments. 

An employer may choose not to dock a non-exempt salaried for leaving two hours early.  In this case, yes, they can, but they choose not to.  Not having personally done payroll for decades, I'm fuzzy on what happens next. 

If Fred works a 40 hour week at $20/hr and cuts out 2 hours early and is paid his full "salary" of $800/wk  without reduction or docking, then he is thereafter ACTUALLY being paid a normal hourly rate of $21.05 because his $800 was only for the actual 38 hours worked:  800/38= 21.05.  So any overtime next week would be computed at the rate of $21.05 x 1.5, right? There are also vagaries about how your regular workweek is defined that could affect these issues, too.

But, of course, I could be wrong....  


#2

Exempt vs Non-Exempt  
Posted: 03/23/2011 01:26pm   Revised: 03/23/2011 01:36pm  
  

We can have different definitions for what it means to be a salaried employee. Based on my experience and way of looking at it, I agree with what Amanda has said. 

 Doesn't mean you (Paul) are "wrong," although I've never heard your way of explaining it before.


Private10790

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 01:39pm  
  

Everybody so far is right, best I can tell, although I've always understood it just exactly as Paul explains. 

Here is something from a payroll service:  http://www.paychex.com/pdf/exempt.pdf summarizes the major federal provisions and discusses the pay period terms as opposed to the exemption terms.

The following was copied from a discussion covering the same question asked elsewhere: "what's the diff between salaried exempt, salaried non-exempt and hourly?"

First of all this classification is rarely used anymore. Mostly now the companies are either salaried exempt or hourly non exempt.

Salaried non exempt is a nightmare for payroll.

However, the category exists for you. They are non exempt. Doesn't matter if they are salaried or not. Salaried and Hourly are just how the employee is paid. The rules are for exempt and non exempt and do not reflect on the method of payment.

Exempt are not docked for time missed less than a day. They can be docked for a whole day missed. Exempt are not eligible for overtime.

Non exempt are only paid for the hours they actually work. It does not matter if they are salaried non exempt or hourly non exempt. They are both treated the same way
.


Private10775

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 01:49pm  
  

Lets look at the statement again (with a key word bolded) ...

"Salaried nonexempt are awarded all the protections of a salary (including getting paid the same even if they work 38 hours, cannot be docked pay in less than whole day increments, etc.), ..."

Does the Fair Labor Standards Act really prevent docking pay in less than whole day increments for salaried non-exempt employees?  If it happens to salaried exempt employees (except for FMLA) they could lose their FLSA exemption status.  But what happens if it is a salaried non-exempt employee?  Does US DOL WHD come out an wag their finger at you?

(Don't be offended by last question anyone.  I'm just trying to be melodramatic.)


Private10775

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 01:52pm  
  

Full disclosure:  I was typing my last post while Jim posted his last one.  I didn't see his last post until after I punched the Respond button.  His research trumps my speculation.


Private10790

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 02:05pm   Revised: 03/23/2011 02:29pm  
   (1 rating)

Let's presume that Amanda meant that the employer's policy prohibited docking the pay of anyone on "salary."  Although you can dock their pay, it is perfectly legal to do it either way, as long as it's consistent.  Smile

There is no category of salaried non-exempt in the FLSA. The DOL does not prohibit paying a non-exempt employee via salary (per variation, using your prior terms) as long as they also get overtime when worked; but the only categories recognized by the DOL are exempt and non-exemptCry

Yeah, it don't make sense, but ya gotta accept that we have a FLSA law based on ~1936 work procedures in a Great Depression economic context when the most of the few employed worked on farms, performed manual labor or served assembly lines.  At that time, the only viable metric to reflect the value of most work was the amount of time they spent doing rote tasks closely overseen and totally controlled by management.   It simply can't reflect the knowlege-worker environnment of today when there is little difference between the salaried but basically hourly-paid technician and the exempt salaried professional technologist. Yell  At least, this 2004 version is more sensible than the old creaker it replaced.


Private10775

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 02:35pm  
  

Thank you Jim for your first-hand experience on this issue.  It sure is nice to have some one in WorldatWork who actually was in the workforce in 1936! Wink


Private10790

   
Exempt vs Non-Exempt  
Posted: 03/23/2011 04:45pm  
  

Quite amusing,  Tongue out but don't be silly, Paul.  Wink  I would not have been working then... I would have been one of those folks on the streetcorners selling pencils out of a tin can.  Innocent


#2

Exempt vs Non-Exempt  
Posted: 03/24/2011 04:31am  
  

Jim said---Let's presume that Amanda meant that the employer's policy prohibited docking the pay of anyone on "salary."  Although you can dock their pay, it is perfectly legal to do it either way, as long as it's consistent.

That's the assumption I was making. I'm not sure of the reasons why an employer would put someone on salary and then treat them like hourly, except for overtime, especially since some employers pay overtime to their exempt salaried employees.


Private10775

   
Exempt vs Non-Exempt  
Posted: 03/24/2011 08:22am  
  

To Anonymous #2,

I think you're moving from the realm of what is allowed, to what should be allowed. 

From a pure HR standpoint, what difference does it make if a person is paid salaried through variation reports, or hourly through input reports.  Shouldn't a person receive the same dignity and respect regardless of what that the person is doing?  

Maybe I'm missing something in your discussion, #2.  Could you share a little more of your point? 


Private10790

   
Exempt vs Non-Exempt  
Posted: 03/24/2011 08:48am  
   (1 rating)

Being paid time and a half overtime is not an optional selection but a legal entitlement persuant to the FLSA law unless specifically exempted by the position content.  Putting someone "on salary" simplifies paycheck processing but it doesn't necessarily make them exempt.  As Paul noted, you then don't have to require them to punch a timeclock or post start/stop times online but only report variances from the regular workweek.  Exception reports power your payroll compliance with FLSA for the non-exempt sectretary (or Administrative Assistant) to the executive, just as it does to the janitor who is also non-exempt FLSA overtime elibigle even if "on salary." 

See the ugly details in the section on computing overtime here at the end of this DOL WHD Handy Reference Guide:  http://www.dol.gov/whd/regs/compliance/hrg.htm.  It unfortunately confirms my earlier speculation that if you let a non-exempt receive a different hourly rate each week, their regular base rate for overtime fluctuates accordingly, too. 


#2

Exempt vs Non-Exempt  
Posted: 03/24/2011 10:47am  
  

I just wanted to let Amanda know that I understand and fully support what she has said and that she describes a pay system that I would install. I also understand and respect the positions of other posters who have different and fully justifiable positions on this.


Private10790

   
Exempt vs Non-Exempt  
Posted: 03/24/2011 12:02pm  
   (1 rating)

Fully concur.  It's just wonderful when everybody is right.

Smile


Private10790

   
Exempt vs Non-Exempt  
Posted: 04/21/2011 07:41am  
   (1 rating)

This string attracted such interest that I wrote a fully detailed technical article on the subject that appeared in the Compensation Cafe today:  http://www.compensationcafe.com/2011/04/salaried-can-mean-non-exempt-really.html.


 
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