Salaried vs. Hourly? Exempt vs. Non-exempt?
Deciding how to classify employees can be a complicated situation with many things to consider along the way. One of the big ones is Overtime Rules.
Salaried employees are Exempt from Overtime Rules. Overtime is defined as more than 40 hours in a week. It must be paid at rate of 1 ½ times their regular rate of pay. In fact, the law does not require exempt positions to be salaried; but, because overtime is not required leads many businesses to shift that way.
But don’t think by just classifying them as Exempt, you can get away with not paying overtime. In order to be classified as Exempt, they must meet the following 3 factors.
- Salary Level
–Currently, you must pay someone at least $455 per week or $910 biweekly or $1971.66 monthly or $23,660 annually. (Someone making more than $100,000 annually will typically be exempt.)
- Salary Basis
– The employee must receive a set, fixed salary that is not subject to cutback due to variations in quality or quantity of work performed. Salary plans must be applied consistently whether the employee is considered exempt or non-exempt.
- Job Duties.
– Employee must meet all of the criteria specified in one or more of the following exemptions:
- Education Establishments and Administrative
- Professional – Learned or Artistic
- Computer – Related
Make the wrong decision regarding your employees’ wages and salaries, and it could result in potential legal consequences, penalties and fines that could come from either informal or formal complaints by employees or different government agencies.
Not sure what to do? Not sure how to correctly classify your employees?
Don’t get caught in a trap. We can help; give OEM a call!