Expert: Brian Phillips - 10/22/2009

Question
Due to slow business, we have found it necessary to cut hours of a salaried employee. Can we reduce his salary accordingly? If not, can we make him an hourly employee? Our business is in Illinois.

Answer
Debbie,

NO you can't per se reduce salary accordingly based on the hours worked.  I am not mincing your words- well, yes, maybe I am a little...  let me explain... here's how how you can either pay the person less and keep them working a "full week",  or convert them to hourly.

When an employer chooses to pay someone a salary in the true sense of the definition, the number of hours worked up to and over 40 hours in a week are not the important issue.    The hours worked by a salary OT exempt person are "incidental" to the workload of the position which is in most cases believed to be a typical 8 hour day by most people.  In that regard, salaries are generally thought to be based on 2080 work hours in a year   ( 8 hours a day x 5 days x 52 weeks)   Thereby,  a person paid a $ 40,000 salary goes home and divides that by 2080 and says to themselves:  I make $ 19.23 per hour.    Maybe but not really...

If your employee is exempt from overtime and is truly qualified as an administrative, executive, professional,computer or outside sales person according to the Fair Labor Standards Act (FLSA) then the any number of hours they work is a mute issue.

If a person is paid any salary above the required $ 455 per week, the number of hours they work is merely incidental.    So, as long as the salary is above $455.00 per WEEK,  they can work 10, 15, 31, 45, 70 hours per week.    Salary is Salary.

If money is the issue, and you feel like the bad guy for asking the person making $ 700 per week to accept $ 500 , but as a salaried person still work the same hours, then the best arrangement is to convert them to hourly.

So, yes, I minced your words (sorry)  you can reduce the SALARY AMOUNT to any amount $455 or higher but it is not correlated with the number of hours the person is actually working NOW.  Other choice is to make them an hourly employee- and overtime will apply to 40 hours or more per week.    Whatever you do,  put the "new deal" in writing and have the employee sign off to "agree" .  Give at least one full pay cycle of this notice.  Many states require employees receive notice of pay changes in writing and by continuing to work, they "accept" the change-  but a signature is also good to have.  If they refuse the change,  generally they must resign or quit.

If any follow up question, just ask.

Brian Phillips
Consultant
www.HARVIS.org