Salary vs. Hourly Clearly Defined

Rebecca Mazin’s HR Answer Blog covers additional key questions about payroll, employment law, hiring, firing, and other personnel issues.

Since posting my previous article, Salary vs. Hourly I have received numerous emails from readers requesting further clarification.  Readers are wondering how to determine whether an employee should be paid salary or hourly and what defines whether an employee is exempt or not.  I’ve had a couple of concerned employees who were originally hired as hourly then switched to salary and then required to work Saturdays.

With this in mind, I think we need to dig deeper into the Department of Labor guidelines on these issues.  The U.S. Department of Labor enforces the Fair Labor Standards Act which clearly (well, in my humble opinion not so clearly) defines any and all issues pertaining to wages.

I was able to find a PowerPoint presentation on their website which provided some great information for employers as well as employees. Please follow this link and go to the bottom of the page under Presentations for this information.  This is a very in-depth and lengthy presentation that requires some study to understand it but clearly makes sense.

Some very basic information is as follows:  Federal Minimum Wage is $5.85/hour beginning July 24, 2007, $6.55/hour beginning July 24, 2008 and $7.25/hour beginning July 24, 2009.  Overtime is 1 1/2 times the regular rate of pay for all hours over 40 in a work week.

There are three tests to determine whether or not an employee would be classified as exempt (salary level, salary basis and job duties).  Essentially, the primary duty of an exempt employee is management of the enterprise or a customarily recognized department.  This person regularly directs the work of two or more other employees and has the authority to hire or fire or make recommendations regarding these issues.

I have stated this before – when an employee is salaried, he/she must be paid the full salary for any week in which the employee performs any work. If an employee is ready, willing and able to work, deductions may not be made for time when work is not available.  There are seven permitted salary deductions and examples of improper deductions listed in the presentation.

Please download a copy and keep it in your files.