Reducing exempt EE's FTE & salary

jcacciola

What is the legal way to make a long-term or permanent reduction in an exempt employee's FTE and salary? We have two situations: 1) one is a voluntary request to go from F/T to 4 days/week, 32 hours, and 2) one is an economically related need to reduce an exempt position to part-time. In both cases, we want to make salary reductions that related to the reduced work schedule.

Thanks in advance for your advice.

Jeanette Cacciola, SPHR
in Texas

bsa

Because in reality your are creating new jobs for these people, your first step would be to create new job descriptions. You may find when you reduce the responsibilities of an exempt position that the position has become non-exempt and would be paid by the hour, effectively reducing the pay. I would use this approach for both situations.

You can research pay rates in several places on the internet. Or use their current salary to determine an hourly rate for their new position. 40 hrs/wk times 52 weeks = 2080 hours per year. Divide their annual salary by 2080 to get an hourly rate ($50k = $24.04/hr @ 32 hrs/wk = $40k). If your exempt employees work an average 45 hrs/wk use 2340 ($50k = $21.37/hr @ 32 hrs/wk = $35.5k).

Your policies will determine if these new part-time positions are eligible for any benefits, i.e. insurance, vacation, etc. Good Luck.

Kymm

Does anyone have suggestions on good web sites to research pay rates? I've done salary.com but wondering what some other ones might be. Thanks!

Rockie

It is very difficult to put a "per hour" cost on an exempt person's salary, because, you have, in effect, made them "non-exempt" if you pay them by the hour. If these positions truly are to remain exempt, then I would re-negotiate the salary and the conditions of hire. Example: If individual would like to work four days a week instead of five, then an agreement should be reached as to an appropriate reduction in salary by a percent - such as 10 - 20%, depending on what the individual would be able to do.

One problem you are going to have with these people is if they have to come in on their "day off" or work a little extra one day, they are going to start asking for "comp" time. I would put in my letter of agreement with them that this is your agreement; however, if business needs necessitate, they need to understand they may be called upon to come in and work "extra". No "comp" time will be given for this as their status as an exempt employee prohibits this. I have been down this road before with so called exempts who want to reduce hours, but expect to be compensated extra. What I reply is "Well, if I work over 40 hours a week, I am not compensated for it, nor do I get comp time." It is very difficult to get this concept over to an exempt individual who wants to work "part time".