Expert: Shirley McAllister, CPP, PHR - 4/24/2008

Question
Hi Shirley. Here I am again. Can you pay a salary to an hourly employee as long as they are coded non exempt? We have part time employees who are getting a salary and only working 25 hours a week. I hope my question is making sense. :)
Thanks for being there,
Denise

Answer
You can pay a salary to a not exempt hourly employee. The only thing you have to watch for is if there is overtime. It makes it a little difficult for payroll.

#1. You pay a salary plus any extra time worked.

If you put a salary on an hourly job than that person works over the hours which are covered by the salary you must pay them extra for the hours because you are telling them we are paying you 250.00 to work 25 hours a week. If they work 30 hours a week than they are working over the time the salary is paid for.

What payroll then has to do is figure out the hourly wage. so if the salary is 250.00 a week they have to take the hours x 52 weeks. The person is being paid to work 25 hours a week. 25 hours X 52 weeks is 1300 hours. Now they are being paid 250.00 a week so 250 x 52 is 13,000.00.  If you divide 13000.00 by 1300 hours you will get 10.00 an hour.

If the person works 30 hours than they are working 10 hours over so they must have added to their salary 10 x 10.00 or 100.00. For that week their salary would need to be 350.00.  If they go over 40 hours than they must be paid overtime.

They are still hourly so everything has to be calculated back to hourly wage. It becomes complicated because if they work one or two hours over they still have to be paid 10.00 for each of those hours.

Not to many people pay salaries to hourly employees and those that do just make sure they never work past the hours they are paid to work.

That is not even to mention how you would figure out the PTO or sick and vacation pay.  How about holidays, how many hours before you get a full holiday or paid for 1/2 day? Our part time hourly employees are paid only 1/2 of what the full time employees are paid. However, at 30 hours our employees become full time employees.

It is also a huge problem for insurance any way it is for us because our part time people pay for 1/2 of their insurance our full time people pay nothing.

Might want to think this one over.

Shirley