Expert: Shirley McAllister, CPP, PHR - 5/24/2011

Question
QUESTION: Hello,

I hope you can settle this for me. I work in a 3 person office and was working part-time. They are now moving me to full time/salary. I was promised a certain hourly wage but when they figured the conversion to salary they took out all the holidays and my Paid Time Off (PTO) hours before multiplying by my promised hourly wage and the resulting yearly salary is less than what was originally promised. (261 weekdays - 6 holidays - 10 vacation days = 245 days)

Is this standard practice because I have never heard of this before? I had always taken the hourly wage times the hours worked in a week (40) times 52 weeks in the year to get the yearly salary.

Would you please tell me which way is correct?

I am in the state of California if that makes a difference.

Thank you for your help clearing this matter up.

ANSWER: We start with the annual wage and than break it down into hourly by using the formula you described.

I think that is the way it should work it is the formula we would use to switch from hourly to salaried. We would take the current hourly wage times 2080 hours to get the annual wage.

40X 52 weeks is 2080 hours. So if you do it backwards than 2080 hours x hourly wage is equal to annual wage.

Shirley

---------- FOLLOW-UP ----------

QUESTION: Thank you so much for your response. I just have a couple more questions if you don't mind answering them. I want to clarify so I can go to payroll with it.

1. Is the way they are figuring the wages for salaried employees legal in the state of California?

2. So just to clarify, if they use their formula to figure my salary, I will not get my promised wage will I?

Thank you again for your help with this. I do appreciate it!

Answer
The laws in california or any other state do not have an accounting formula to use. The law simply says that the employee must be paid at least minimum wage and if they are salaried exempt they must be paid at least the wages for that exemption.

The formula is the companies formula, however, they will be paying you the vacation days and the PTO days so they should be figured into your salary. The formula I gave you that you already had is what the majority of HR and Accounting professional's use.

It is also the formula taught by the American Payroll Association.

Shirley