Most of us think the words salaried and exempt are synonymous. They’re not quite, however. A non exempt employee can actually be salaried. So how does this work?
Well, first of all, salaried simply means paid a salary.
Non-exempt means that the employee qualifies for overtime wages.
So, technically, an employee could make a base salary with overtime wages added to it.
However, just because you can do it, doesn’t mean you should.
How to Pay a Non Exempt Employee on a Salaried Basis
If for some reason you were inclined to do this, you could comply with laws, assuming everyone did their part:
- Decide on a weekly salary for which the hourly rate is greater than or equal to the minimum wage. So if an employee were working 40 hours per week, her salary would have to be at least $290 per week to comply with Federal laws. Many states have their own minimum wages too.
- Track the employee’s time. We have been taught that we don’t need to track our salaried employee’s time but if they are overtime eligible, we do.
- If your employee is paid more than minimum wage, figure out what her hourly rate would be. Then when she works more than 40 hours in a week, pay her one and a half times that rate. So if the employee’s weekly salary is $500, then divide that by 40 to get her hourly rate of $12.50.
- Figure out what deductions you need to subtract from your employee’s salaried paycheck when she’s out on unpaid leave.
- Train employees on being an hourly worker. Even though you call them salaried, they are non-exempt and must learn about what it means to be non-exempt (like time tracking, getting paid for waiting, driving, working at night, etc).
Why Non Exempt Employees are Better Off Paid Hourly
Paying non exempt employees on a salary basis comes with the complications noted above and with a skewed concept of the classification. Remember, when we hear the word salaried, we tend to think exempt. That is the primary danger here. Need more reasons not to do it? Here you go:
- Employees who consider themselves salaried don’t think they need to track their time. Tracking time for non-exempt workers is the law, however, so even salaried non-exempt workers need to do it.
- Employees who have always been salaried aren’t familiar with wage and hour rules. They need to be trained on things like waiting time, travel time, working during off hours, meal breaks, and rest breaks and all the other rules that exempt employees don’t generally have to follow.
- Deductions for exempt employees are generally not allowed so you may forget to make them for your non-exempt salaried employees, hence overpaying them.
- Why would you want to pay an employee for 40 hours when they only work say 36 hours? Tracking employee time saves a lot of money for employers.
- Most time tracking systems aren’t set up to deal with this scenario, so you’ll have a tough time tracking time in our age using this method. You can’t setup employees as hourly because your reports want to multiply their time by an hourly rate, and you can’t setup your employees as salaried because the systems aren’t designed to track overtime for salaried employees. So you’re relegated to tracking time by hand, and that’s just not very efficient or accurate.
Salaried or hourly, non-exempt employees need to track time.