Making the Change from Hourly to Exempt

dotato

All,

We have determined that three hourly positions within my organization satisfy FLSA tests for exemption. We have decided to change their status to exempt, including added vacation accrual that comes with exemption, effective with the beginning of the new fiscal year.

Now what!

We have to tell the employee, obviously, but does anyone have experience with this? I have done the math, and they will be making more exempt than they did hourly/overtime. We also add a week of annual vacation accrual for all salaried employees.

Aside from making the administrative and accounting changes, what’s left?

Thanks,


Erik

Don D

[font size="1" color="#FF0000"]LAST EDITED ON 03-21-02 AT 02:13PM (CST)[/font][p]If you have separate 401(k) plans for hourly and salaried, that will require administrative work if they are actually moving from hourly to salaried. You will be switching them from one plan to the other through communication with your Plan Administrator (recordkeeper)and make sure the funds are shifted properly if this situation applies to you. When we shift people like this we use the original hire date for vacation program purposes, so be sure you fairly treat their vacation accrual according to whatever practice your company has. Fully document the logic for the change in the personnel file being sure you have applied the appropriate test correctly. The biggest administrative pieces will apply to the payroll process so be sure payroll is fully aware of the shifting in status. It may result in a different calculation of hourly rate for payroll purposes. Does it trigger a new review period? Do you keep turnover rates and if so do you keep them separately for exempt and non-exempt? If so, you need to remove them from one formula and add them to the other. Do you have a third party insurance plan administrator? If so you need to do that so they can properly reflect the person on the correct roll. Be sure to document it on whatever form you use for status changes and perhaps on the personnel file jacket so you will forever know the change date. And be absolutely sure the employees understand every detail of what it will mean to their check (if any change), the loss of OT, and any other thing they may view as a loss or a gain.