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Part of our downsizing plan will involve reclassifying several F/T exempt staff members to P/T. Management has proposed a salary reduction in exchange for reducing them to 25 hrs a week. Their job des
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Calling HRPro
posted at 5/13/2009 6:16 AM EDT
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Posts: 237
First: 7/10/2007 Last: 8/31/2011 |
Part of our downsizing plan will involve reclassifying several F/T exempt staff members to P/T. Management has proposed a salary reduction in exchange for reducing them to 25 hrs a week. Their job description/duties will not change, only the time commitment, thus they would retain their exempt classification (in my view.
I’ve always avoided tying an exempt position to hours so I would be more comfortable defining their job in terms of “3 days a week” instead of “25 hrs/wk”. This however presents a problem when they might be called upon to work an extra day once in a while. The only solution I can see is to make them hourly/exempt. Any other ideas or thoughts on defining an exempt position in terms of hours/week? |
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Calling HRPro
posted at 5/13/2009 7:03 AM EDT
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Posts: 1103
First: 3/16/2007 Last: 8/19/2011 |
As you might imagine there are a number of ways to accomplish what you are trying to do.
Their jobs will not change, simply the requirement for how much the company needs them to do the job. You also wish to retain the exemption. Let me offer you a couple of suggestions. All information regarding an exempt classification maintains the following understanding: The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week; 1. Convert their time management to FTE (e.g. full time equivalent of 40 hours) if you need them for 25 hours, on average then the FTE equivalent of that is a .625 employee. If their weekly salary is $1000, then the FTE equivalent salary is $625. The greatest concern you have is to not pay less than that. In order to maintain an exempt classification you must pay them a salary that does not fluctuate from week to week based upon the quantity or quality of the work. If the individual works less than 25 hours any reduction in wages would be a violation of the salary basis method of payment. However DOL W&H does allow for extra payment above the salary (C.F.R. 541.118 ( provides that "additional compensation besides the salary is not inconsistent with the salary basis of payment". DOL's Field Operations Handbook, Section 22b01, states that "Extra compensation may be paid for OT to an exempt employee on any basis. The OT payment need not be at time and one-half, but may be at straight time, or flat sum, or on any other basis."). This would meet your needs. 2. Another way of paying them would be fluctuating work week salaried non-exempt. This would allow you to fix a salary that does not change, pay them by the hour for each hour they work ABOVE the 25 hours, for example, yet still have to pay OT. The advantage here is that your OT exposure would be substantially reduced. The following conditions must be met: 1) Hours must fluctuate from week to week; and, 2) There must be a clear and mutual understanding between the employee and employer that the fixed salary is compensation for the hours worked each work week, whatever the number; 3) The amount of salary must be sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked; and, 4) The agreed-upon salary must be paid even though the workweek is one in which a full schedule of hours is not worked. Neither the federal regulations nor the case law establish a requirement as to the degree of fluctuation in hours that must occur, but they do state that typically the salary is paid to employees who do not customarily work a regular schedule of hours. Under this method, the salary is intended to compensate the employee at a straight time rate for whatever hours are worked during the workweek. As such, the regular hourly rate of the employee will vary from week to week and is determined by dividing the total number of hours worked in the workweek into the amount of the salary. Overtime is then calculated by multiplying the hours in excess of forty by the regular rate for that week by one-half. I am not comfortable with the term Hourly/exempt as that is fraught with challenges. |
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Calling HRPro
posted at 5/13/2009 2:48 PM EDT
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Posts: 1103
First: 3/16/2007 Last: 8/19/2011 |
You can literally determine an hourly rate and pay him for each hour over his allotted FTE without jeopardizing the exemption. the key is simply pay him his base salary every week regardless.
Good luck and of course you are welcome. |
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Calling HRPro
posted at 5/13/2009 4:50 PM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
I second HRPro's idea of a prorated salary with some benefit for extra time worked...with the minimum being at least $455 per week. If you know they won't work more than a 40 hour week, there is really no reason not to make them hourly, because OT won't even come into play until you hit the 40 hours.
One thing I will caution is that cutting a person's salary by 30% without their agreement could easily lead to (1) them quitting and getting unemployment benefits -- depending on the state (in TX they would get it because that is considered 'good cause' and/or (2) them quitting because they found a job that could pay more than that. You might have more turnover than expected. |
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