I would like to financially reward a salaried, exempt employee for working an exorbitant number of hours last month when performing work on a large project with a difficult deadline. Is it permissible to pay the employee for the extra hours worked without jeopardizing the employee’s exemption status?
The Fair Labor Standards Act (FLSA) allows employers to compensate exempt employees with additional compensation (beyond the employee’s regular salary) without jeopardizing the exemption. The additional compensation may be in the form of comp time, bonus, differential, time and a half or straight time pay. So the good news is that additional pay (in any form) does not affect the employee’s exempt status.
However, the same does not hold true in terms of deducting from exempt employees when they work less than standard hours. Although there are a few exceptions to this rule, employers generally may not deduct from an exempt employee’s regular salary unless the employee performs no work in the workweek. Making unlawful deductions from an exempt employee’s salary jeopardizes the overtime exemption. Therefore, such deductions may result in the employee losing the exempt status and becoming overtime eligible. The Wage and Hour Division of the US Department of Labor has provided a list of circumstances under which a deduction in increments of less than one full