With the new minimum salary threshold for exempt employees taking place later this year (Read more about that here), employers should concentrate on making sure they are in compliance with the new rules and also confirm that their exempt employees are correctly classified. In addition, employers should make sure they fully understand how exempt employees should be paid.
To help employers with understanding payment of exempt employees, we’re debunking three common myths associated with exempt and salary employees.
Myth #1: No salary employees are eligible for overtime, therefore a company can classify an employee as salary to keep overtime costs at a minimum.
This is probably the most common misunderstanding. Paying an employee a salary does NOT guarantee that the employee is exempt from overtime, companies can have non-exempt salary employees who are still entitled to overtime pay. In order to be considered exempt, an employee must: (1) be paid at least the minimum salary threshold (currently $455 per week but is set to increase to $913 per week effective December 1, 2016); and (2) meet certain job duty criteria based on established exemptions provided by the Fair Labor Standards Act (FLSA). For more information about correctly classifying an employee as exempt, read our previous post by clicking here.
Myth #2: You only have to pay exempt employees for the days they work. If they work a half day, you only pay them for a half day.
The FLSA is very specific as to the type of deductions that are permitted from an exempt employee’s payroll. As a general rule, if an exempt employee performs any work during the workweek, the employer is responsible for paying the exempt employee their full weekly salary. Exceptions to this include full day absences for personal reasons other than sickness or disability, full day absences for sickness or disability (if the employer provides a plan or policy which provides compensation for salary lost due to illness such as sick leave or paid time off), unpaid disciplinary suspensions for one or more full days, unpaid leave taken under the federal Family and Medical Leave Act (FMLA), or during the employee’s initial or final week of employment if the employee does not work the full week.
An employer is also not permitted to make a deduction from an employee’s pay for a partial day deduction. If an employee works any part of the day the employee should be compensated for the full day of work.
Myth #3: If the business is closed for reasons determined by the company (such as a holiday shut down or weather closure), you are not required to pay exempt employees.
An employer may NOT make deductions from an exempt employee’s pay for absences caused by the employer or by the operating requirements of the business. If the exempt employee is ready, willing and able to work, an employer must pay the exempt employee for the full day of work even when no work is available.