Hourly vs. Salaried Pay: Watch out!
I hear a lot of misconceptions about hourly versus salaried employees, so on a square, some of these away first hour. I’ll preface this by saying I am not a human resources professional. You’ll always want to consult with a human resources professional when making these kinds of decisions to make sure that you’re fully compliant as there are a lot of consequences if you do something wrong here, first off, hourly versus salary. There are a lot of misconceptions. Salary does not mean that you don’t have to pay the employee over time anymore, so if you have an employee who is working 50, 60 hours a week, I’ll often hear employers say, well, I think I should make them salary so I don’t have to pay that time and a half for overtime. That is not correct. First off, salaried must be a position that is looking at both hourly and overtime areas.
Now, what they’re usually confusing is the difference between hourly and salary and exempt versus non-exempt. Exempt is a status that you look at to say that somebody does not need to be paid overtime. Exempt positions include professional designation such as employees who are engineers, who are accountants, lawyers licensed in their profession. There are some other examples of what can meet the exempt status in the department of labor rules. However, again, I recommend highly that you consult an HR, professional to clarify these positions. So exempt means they’re exempt from overtime and you don’t have to pay time and a half for hours over 40 per week. Non-exempt physicians, whether they are hourly or salaried, must be paid overtime at the time and a half, right? So for a salaried employee, if you have a salaried employee who makes $30,000 a year, I don’t know what that works out to per hour, but basically if they work 40 hours every week, you’ll be paying them $30,000 a year.
However, if they work overtime, you’re going to calculate an hourly rate and pay them at time and a half just like you would an hourly employee. So there is no benefit. You’re not going to avoid paying overtime to a salaried employee who is non-exempt the, I really do strongly suggest keeping everybody at hourly unless you have an exempt position available. So keep that in mind when you’re making your hiring decisions and when you’re deciding on hourly versus salary, I am seeing a lot of cases where people are assumed to be salary and assumed that that means they don’t have to pay them over time. And that’s not just, that’s not correct. They’re also going to be some new rules coming out January 1st of 2020 that are going to talk about the dollar amount. That has to be paid for someone to be exempt from overtime as well. So keep an eye out for those new rules. If in doubt, speak with an HR professional and clarify your positions before there’s a problem.
Donna Bordeaux, CPA with Calculated Moves
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