Paying exempt's hourly wages?

stretched2thin

Under FLSA, can we pay an exempt employee on an hourly basis? I'd like to guarantee them a minimum salary, but pay them straight hourly pay for hours worked over 40. Is that allowable? Does that jeopardize their exempt status forcing us to pay them time and a half?

Why? The hours they work are billed to the client at a premium. This motivates them to work more hours, thus bill for more hours, therefore the client pays us more.

System

There would be no real reason to pay this exempt employee hourly for purposes of billing. You can still take the ee's annual salary and divide by 2080. That's the rate at which you should bill the client.

lhill

I believe if you pay them an hourly wage they lose the exempt status. I'd check with the local Wage and Hour division for the FLSA ruling.

Don D

I hope I don't find out you're one of my vendors.

Crout

Which exemption do they fall under?

marc

I am not sure I am reading this correctly, so a grain of salt may be in order here.

It is OK to bill clients for hours worked by exempt personnel - even when an upcharge is going on. I am thinking of professional services such as engineers, CPA's, lawyers, and such.

I also know that certain professionals, again using lawyers as an example, can be paid on a straight time basis - no OT involved and no stress on the exempt status.

In most of my experience in these types of situations, the EEs involved are paid salary with discretionary bonus at the end of the year. The bonus calculation can have lots of features, including billable hours, collection of the associated dollars, profitability, etc.

Those features can help with the motivation without damaging exempt status - and yes, you must keep records of billable hours to accurately charge the clients, so timekeeping is not a problem.

Crout

I agree with marc. The big issue is not how you track their time, but rather what kind of work they are performing for their pay.

TN HR

Bingo! Marc and Crout nailed it. Pay for performance, not for how well they can pad the billable hours. If you do the latter you are doing your customers and employees both a major disservice.