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HR Question of the Week – October 31, 2014

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I would like to reward a salaried, exempt employee financially for working a large number of hours last month when doing work on a large project with a tight deadline. Can I pay the employee for those extra hours worked without jeopardizing the employee’s exemption status?


The Fair Labor Standards Act (FLSA) allows for employers to compensate their exempt employees with additional compensation (more than the employee’s regular salary) without jeopardizing the exemption. The additional compensation may come in the form of bonus, comp time, differential, time and a half or straight time pay. The good news is that giving additional pay does not affect the employee’s exempt status.

However, the same is not true in terms of deducting from exempt employees when they work less than standard hours. There are a few exceptions to this rule, but employers generally cannot deduct from an exempt employee’s regular salary unless the employee does not do work in the workweek. Making unlawful deductions to an exempt employee’s salary jeopardizes the overtime exemption. Therefore, deductions may lead to the employee losing the exempt status and becoming overtime eligible. The Wage and Hour Division of the US Department of Labor has given a list of circumstances under which a deduction in increments of less than one full workweek is permitted:

When an employee is not present at work for one or more full days for personal reasons other than disability or sickness. (For example, if an exempt employee asks for vacation, but does not have vacation pay available.)

For absences which consist of one or more full days due to disability or sickness if the deduction is made according to a bona fide plan, policy or practice of giving compensation for salary lost due to illness. (For example, this applies when an exempt employee has to take a sick day, but is not eligible for paid sick leave or has used up all of his/her paid sick leave. This does not apply to absences of exempt employees due to illness for a company that does not provide paid sick leave.)

To offset the amounts employees receive as witness or jury fees, or for temporary military duty pay.
For penalties that are imposed in good faith for infractions of safety rules of major significance.
For disciplinary suspensions that are unpaid that consist of one or more full days implemented for conduct rule infractions in the workplace.
In the employee’s first or terminal week of employment, if the employee is not working the full week. (For example, if the employee starts in the middle of the workweek, the employee’s salary might be prorated for the actual days that are worked in that first week.)

For unpaid leave taken by the employee under the federal Family and Medical Leave Act.

In conclusion, while giving additional pay to exempt employees is allowed and does not violate the salaried basis of pay, it is important to be careful with deductions taken from exempt employees’ pay.

Source: HR Support Center | Copyright © 2017 AdvaPay Systems, LLC


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