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Nov07

Employee Compensation

I own a business in FL. I want to pay all my employees a salary instead of a hourly wage as some weeks they work 30 hour weeks while other weeks its 50 based on workload. I can’t find much information on the subject but I want to know if I can pay any employee a salary if they are not a manager. What I have heard is that a person can only be paid salary if they are in charge of four or more people. Is this true? Can anyone provide a link to a reliable source covering this? Thank you.

Employers in Florida are subject to the federal Fair Labor Standards Act (FLSA). The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.

There are two ways in which employees can be covered under the FLSA; enterprise coverage or individual coverage.

Enterprise coverage includes organizations that have at least two employees and annual sales of at least $500,000. The company’s total sales between all locations are considered towards the annual volume.

In the absence of enterprise coverage, employees are covered under the FLSA if their work regularly involves them in interstate commerce. The FLSA covers individual workers who are engaged in commerce or in the production of goods for commerce. Keep in mind, interstate commerce can refer to an employee simply making or receiving phone calls or emails from out of state.

Under the FLSA, employees are classified as either non-exempt or exempt.

Non-exempt employees must be paid for all hours worked and are subject to overtime and minimum wage requirements prescribed by the FLSA. Most employees are considered non-exempt.

Conversely, exempt employees receive a fixed predetermined salary for any week during which work is performed regardless of the quantity or quality of such work. Exempt employees are excluded from overtime pay provisions.
It’s up to employers to determine employee classification based on FLSA guidelines.

To be exempt, an employee must pass all three “tests”, salary level, salary basis, and duties, as outlined by the FLSA.

The salary level test: Employees who are paid less than $455 per week (FYI: the DOL has proposed to increase this to $970 per week in 2016) are non-exempt.

The salary basis test: An exempt employee must receive a regular, predetermined amount of compensation each pay period on a weekly, or less frequent, basis. Aside from a few exceptions, an employee must receive the full salary for any workweek during which the employee performs any work, regardless of the number of days or hours worked.

The duties test: An employee who meets the salary level and salary basis tests is exempt only if he/she also performs exempt job duties. The actual tasks of the job are to be evaluated, not the job title. There are three typical categories of exempt job duties titled executive, professional, and administrative.

Job duties are exempt “executive” job duties if the employee regularly supervises two or more other employees, has management as the primary duty of the position, and has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments).

“Professionally” exempt work is predominantly intellectual, requires specialized education, and involves the exercise of discretion and judgment. Advanced degrees are the most common measure of this but are not absolutely necessary if an employee has attained a similar level of advanced education through other means and performs essentially the same kind of work as similar employees who do have advanced degrees.

“Administratively” exempt employees provide support to the operational or production employees and have a major impact on the overall business. An administratively exempt employee has the authority to create or interpret company policies, has responsibilities that directly relate to the overall business operation, has the decision making ability to make significant financial impacts, and has the authority to deviate from company policy without prior approval.

An employee who doesn’t pass all three tests is considered non-exempt under the FLSA.

You can read information directly from the federal Department of Labor at http://www.dol.gov/whd/flsa/.

 

This entry was posted on Saturday, November 7th, 2015 at 7:46 pm and is filed under
Compensation, Labor Laws.
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