salary reduction for exempt employees

When an employer suspends an employee without pay pursuant to a written disciplinary policy for workplace conduct, the employer may reduce the employee’s salary based on the number of full days for which the employee was suspended. For this week’s scenario, let’s look at different reasons an employer may want to reduce an employee’s salary, and whether a reduction would be allowed for that reason. If an exempt employee is on jury duty for one full workweek, no salary must be paid for that workweek. https://www.dol.gov/whd/overtime/fs17g_salary.pdf, https://www.dol.gov/whd/regs/compliance/whdfs70.htm, https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/ifanexemptemployeerequestsamovefromfull-timetopart-timestatus,cantheemployeradjusttheindividual%E2%80%99ssalarydowntocompensatefort.aspx, Your email address will not be published. How Exempt vs. Non-Exempt Classification Works. As a general rule, being paid on a “salary basis”. Updated October 2019 Policy on Salary Deductions for Exempt Employees Page 1 Policy on Salary Deductions for Exempt Employees I. means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. You seek an opinion as to whether this reduction is consistent with the salary basis test for exempt employees under California law. Many employers don't understand that you can't cut an exempt employee's paycheck if they don't put in the full 40 hours. Consider if this reduction may cause the employee to lose exempt status. Exempt employees must generally be paid on a salary basis at a predetermined amount each pay period. Necessary cookies are absolutely essential for the website to function properly. That's two whole weeks of vacation in 4 months with no docking of their vacation or pay. An employer may not reduce the employee’s salary for partial days of work. The WHD provided further clarity in a fact sheet it released in September 2019. By subscribing to our mailing list you will get the latest news from us. The employee in this case must still receive a salary of $455 per week. Impermissible Pay Docking. https://employersresource.com/wp-content/uploads/2017/09/HR_Scenario_Reductions_to_an_Exempt_Employee_s_Salary_featured.png, https://employersresource.com/wp-content/uploads/2020/07/Employers-Resource-Logo.png, Reductions to an Exempt Employee's Salary. How to Reduce the Salary of Exempt Level Employees, ← 4 Easy & Effective Team Building Strategies, Curiouser and Curiouser | HR Examiner with John Sumser. When an employee takes unpaid leave under the Family Medical Leave Act (FMLA), an employer may reduce the employee’s salary based on the amount of time the employee is absent. Issue #9) An exempt employee has requested a move from fulltime to part-time status. Alternatively, employers can reduce salary basis exempt employees’ salaries and hours without affecting the exempt status of the employees. Workology Inc. All Rights Reserved. FTE REDUCTION AS ALTERNATIVE TO LAYOFF Staff (Exempt & Non-exempt) 20 hours per week (.5 FTE ) is the minimum Effort is reduced over course of 12 months. This is provided that the employee still receives payment equal to the employee’s predetermined salary in any week in which any work is performed even if the employee has no leave remaining. Specific state laws may further restrict employers from reducing an exempt employee’s predetermined compensation. Deductions from pay are permissible with an exempt employee is absent from work for one or more full days for personal reasons. In order for the exempt employee’s salary reduction to be defensible, it should be: Permanent; Applied to an entire group or class of employees; Not directly tied to a reduction in hours If an employer temporarily reduces an exempt employee’s salary when … Deductions from pay are permissible with an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability. An exempt computer employee must receive a salary of $455 per week or at least $27.63 per hour. The employer should issue an announcement would advise the exempt employees of this necessity, how long it may last (if known) and how their salary would be reduced. The employer can seek volunteers to take time off due to insufficient work. These cookies do not store any personal information. For more information on exempt vs non-exempt employee classification, see our post How Exempt vs. Non-Exempt Classification Works. If you’re salaried and exempt, you’re not paid according to hours worked and typically must receive a predetermined salary each pay period. Employees that are paid more than $23,600 per ($455 per week) qualify for salaried positions. The employee must then be paid minimum wage and overtime required by the FLSA. You may require the employee to use accrued paid time off or vacation time for this absence (in any increment but courts have endorsed 4-hour or longer increments), but absent a policy or accrued and available time off, you may not reduce an exempt employee’s pay on a day in which any work was performed. These requirements are outlined in the FLSA Regulations (promulgated by the U.S. Department of Labor). The moral of the story is that your employees will work with you willingly to retain their jobs—and in hopes that the salary reduction is a short term solution for a non-exempt employee. Home > Wage & Hour > Labor Commissioner Approves Temporary Salary Reduction for Furloughed Exempt Employees. Issue # 1) Can an employer reduce an exempt employee’s salary due to a slowdown in business? You also have the option to opt-out of these cookies. Save my name, email, and website in this browser for the next time I comment. Issue #4) Can an employer reduce an exempt employee’s salary when they are absent from work because of sickness or disability? When reducing an exempt employee’s salary, you may also reduce the hours the employee is expected to work. When an employee is absent from work for one or more full days because of sickness or disability, an employer may reduce the employee’s salary in full-day increments in accordance with a bona fide plan, policy, or practice that covers sickness or disability pay. Example: A non-exempt employee is paid a salary of $500 per week, and they work 50 hours in a given week. The WHD has opined expressly that a 20 percent reduction in an exempt employee’s salary “while assigned to work a normally scheduled … The difference is that the first instance involves a prospective reduction in the predetermined pay to reflect long term business needs, rather than short-term, day-to-day, or week-to-week deduction from fixed salary. An employer is not required to pay an exempt employee’s salary for time not worked during a leave of absence under FMLA. Employers Can Reduce Employee Salary with a Voluntary Pay Reduction There is a provision which allows exempt employees to voluntarily reduce their pay. All three of the above exemptions require payment of a true salary: "Salary" is defined as agreed-upon periodic compensation, intended to cover a period of at least a week, equivalent to at least $684 per week,* that is not subject to reduction on the basis of quantity or quality of work performed. . It is important to remember that this is a one-time reduction in weekly salary that is made upon the conversion to part-time status. 1  If the employee is 10 hours short during each pay period, that means that they have taken more than 80 hours off from work. An employer may reduce the regular workweek of an exempt employee, for example, from 40 hours to 32 hours, with a commensurate reduction in pay, provided the change applies to all workweeks going forward. Michael (Mike) D. Haberman, SPHR is a consultant, speaker, writer of HR Observations, and co-founder of Omega HR Solutions, Inc. After over 30 years in HR he got tired of the past and focuses here on the Future of HR. I have seen some similar threads, but none lands on my topic exactly. The FLSA requires employers to pay exempt employees at least $684.00 per week in salary, and that salary cannot be reduced (in most instances) by deductions. Issue #6) Can an employer pay an exempt employee partial salary in the first or final week of employment? We'll assume you're ok with this, but you can opt-out if you wish. An employer with a vacation or PTO leave bank, policy, or practice may also reduce an employee’s salary for such full-day OR partial-day absences without affecting the salary basis of payment, if the employee nevertheless receives in payment his or her guaranteed salary. If you’re nonexempt and salaried, your salary is based on your work hours. Payment of the employee’s guaranteed salary must be made, even if an employee has no accrued benefits in the leave plan and the account has a negative balance, where the employee’s absence is for less than a full day. Under the Fair Labor Standards Act's exempt classification tests, salaried workers must meet minimum weekly wage amounts to be considered exempt in certain positions. An exempt employee’s salary can be offset by the amount the exempt employee received as jury or witness fees, or on temporary military duty. Employers may deduct from an exempt employee's pay when an employee is absent from work for one or more full days for personal reasons other than … An employer with a vacation or PTO leave bank, policy, or practice may also reduce an employee’s salary for such full-day OR partial-day absences without affecting the salary basis of payment, if the employee nevertheless receives in payment his or her guaranteed salary. The part-time exempt employee must still receive their full weekly salary, which is not subject to reductions because of the quantity or quality of the work. Exempt employee mandated salary reduction California 12-15-2008, 03:48 PM. Reductions in the predetermined salary of an employee who is exempt will ordinarily cause loss of the exemption. You can make payroll and taxes a simple and easy process for your business. But opting out of some of these cookies may affect your browsing experience. However, the employer is prohibited from further reducing the employee’s salary for these absences. The employee must then be paid minimum wage and overtime required by the FLSA. Job form required to reduce FTE of 80 hours Like what you see? Issue #5) Can an employer reduce an exempt employee’s salary for disciplinary reasons? Your email address will not be published. hbspt.cta.load(485718,'525c0ea1-9666-4095-907e-4f7cd5b5d8f7',{}). You can give fewer responsibilities or demote the employee to another position entirely. Can an Employer Decrease Your Salary for a Poor Evaluation?. These cookies will be stored in your browser only with your consent. Required fields are marked *. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work. If the employee is ready, willing, and able to work, deductions may not be made for time when work is not available. 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