Semi-Monthly Payroll and non-exempt

Rob S · July 2004

Help!!!!

I posted this question in another area a while back, but the issue is getting bigger at our office and I really need to get an answer I can back up with regulation if possible.

I recently moved from HR to assistant controller, and my replacement and I are having a major debate about how do our payroll.

For many many years our company has been semi monthly on payroll (15th and last day of month), and all non exempt people have been paid 86.667 hours per check. If someone worked under or over, then we would adjust the 86.667 up our down. We are handling overtime correctly, so that is not an issue.

My replacement feels that what we do is illegal, and we would be fined "over a million dollars" if we were audited by the DOL.

I have done several searches on the internet to get an answer for this but I can't find anything concrete to back up either side of this discussion. I did however find one state government that pays exactly the way we do.

Can anyone tell me if we are legal or not on this?

Thanks for any help,

Rob S

Donna Banker · July 2004

Non-exempts can either be paid hourly or salaried. Most of ours are hourly but the supervisors are nonexempt salary. Our hourly people we pay for actual hours worked. For non-exempt salary employees we pay 86.67 even if they work less than that, but they get paid overtime if they go over. Exempts get the same no matter whether they work under or over.

Even though we pay semimonthly, hourly employees are actually paid by the week. So some paydays are for two weeks and some are for 3 weeks depending on weeks in the month, the way payday falls, etc. You can't treat hourly employees like salaried. This will be a violation.

Rob S · July 2004

Donna,

I think I understand what you are trying say (after I read this a few times).

One of us has the term non-exempt and exempt reversed, and I think I have it right (but I know some one will chime to to correct me if I am wrong).

I really need a statute that says this is acceptable or not.

Rob

System · July 2004

I'm sure someone will correct me if I'm wrong, but I think twice-monthly paychecks are OK under the federal FLSA. But I think they'd be a pain in the neck, since you figure OT and salary weekly.

Some states require paychecks to be every two weeks or every week, but I don't know about yours.

James Sokolowski
HRhero.com

Rob S · July 2004

Most of our employees work a 40 hour week. We only make an adjustment to the 86.667 if they do not work a normal 40 hour week. If some one takes off a half day without pay, then we adjust the 86.667 to 82.667 for that pay period. It is very easy to put in 86.667 hours into the payroll system for every one and then just make an adjustment to people who did not work their normal work week.

The big question is, can we pay non-exempt people 86.667 per pay period, and then just make adjustments if they did not work the normal 40 hours per week? They of course did not work exactly 86.667 each period, but in the end it is correct (24 pay periods X 86.667 = 2080 hours per year).

Is it a DOL violation if each pay period does not match exactly what hours were worked that specific pay period, but it is correct in the long term?

Rob

Shadowfax · July 2004

If you are making the adjustments, how does someone not get paid the hours worked that pay period? Guess I'm just dense.

Rob S · July 2004

Here is an example of what I am talking about.

The June 30 payroll was for June 16 - June 30. There were 11 work days that period, so hourly (non-exempt) employees worked 88 hours, but were paid for 86.667 hours. If some one was short a half day (4 hours), then they were paid for 82.667 hours, not the 84 hours actually worked. There are often pay periods of 80 or even 72 hours, but we still pay 86.667 hours for those periods too.

The point is that for an individual pay period, we are not paying actual hours, but for the long term, it works out to be the actual hours. As I said before, any hours over 40 in a week are paid overtime on that check, so that is not an issue.

The employees like having a consistant amount for their checks and do not want to change to actual hours worked.

I hope this explains this a little better.

Rob

Shadowfax · July 2004

I don't think you will find anything in the Fed statutes to answer your question - the FLSA is simply silent on when wages must be paid. Typically, state law establishes the time frame (and I believe in Mi the maximum period is monthly) but once the period is established, you must adhere to it. In Mi the statute makes reference to weekly, bi weekly and monthly (not bi monthly), but if you can make them go a month, why not be able to pay twice as often bi monthly? I don't think there is a violation of the FLSA. Did Hatchet weigh in on this before? Seems like he did, but if nnot, that would be a good source.

Donna Banker · July 2004

This is from the DOL website, and is what records you are required to keep for 3 years:

Employee's full name and social security number.
Address, including zip code.
Birth date, if younger than 19.
Sex and occupation.
Time and day of week when employee's workweek begins.
Hours worked each day.
Total hours worked each workweek.
Basis on which employee's wages are paid (e.g., "$6 an hour", "$220 a week", "piecework")
Regular hourly pay rate.
Total daily or weekly straight-time earnings.
Total overtime earnings for the workweek.
All additions to or deductions from the employee's wages.
Total wages paid each pay period.
Date of payment and the pay period covered by the paymentpayroll you should be in compliance.

Employees on Fixed Schedules: Many employees work on a fixed schedule from which they seldom vary. The employer may keep a record showing the exact schedule of daily and weekly hours and merely indicate that the worker did follow the schedule. When a worker is on a job for a longer or shorter period of time than the schedule shows, the employer must record the number of hours the worker actually worked, on an exception basis.

Again, it depends on whether you are doing this to hourly or salary employees. You are saying non-exempt but what you are doing may or may not be correct depending on whether you are talking about paying hourly or salary employees. Hourly pay reflects actual hours worked, but salary wages should not be reduced because an employee has worked less than 86.67. Non-exempts must be paid overtime (whether hourly or salary) but exempts do not get paid overtime (nor have their wages reduced). Hourly non-exempts get paid for actual hours worked; salary non-exempts get paid for their salary whether they work 86.67 or less, but must be paid overtime. Exempts always get paid the same each payday and never get overtime nor have their hours reduced.

If I am told I will be paid $6.00 per hour, then I am hourly. If I am told I will have a salary of $25,000 per year then I am salary. Both of these postions can be non-exempt, but the salaried employee will not make less than 86.67 hours per semimonthly pay period. He may work only 82.25 but must still be paid 86.67. The hourly employee is different - he must be paid actual hours worked.

Dutch2 · July 2004

When I first came to this company (bank) about eight years back they also paid on the 1st and 15th. This was a pain for everyone. We even had employees complaining to the Board Members that they could never be sure how much they were going to be paid and then twice a year (I think it was twice) they would be paid for three weeks on one check instead of two. One of my first campaigns was to change the payroll schedule to every two weeks. In my opinion, the payday every two weeks schedule is much easier for everyeone to keep up with and we have not had any problems since.
Good luck,
Dutch2

Shadowfax · July 2004

Rob I just remembered that JJ form OK let it slip a while ago that she was a former DOL investigator and regional director. Why don't you email her direct - or - if your watching this JJ, give us the real poop. (I told you we'd be expecting this!)

ladyzuesse · July 2004

We are going through a non-exempt/exempt audit - this is the way it has come down from the PTB around here.

It makes no difference whether you pay a non-exempt employee on an hourly or salary basis, except you must pay them overtime. A Salaried employee will be paid the salary amount regardless of the exact hours (40 or less) and OT for anything over that. Hourly employees will be paid for the exact hours worked plus any OT.

Exempt employees (those not eligble for OT) are another baliwick all together.

Nonexempt/exempt and hourly/salaried are two SEPERATE catagories to be determined seperately.
BTW, you can pay exempt employees OT if you WANT to, but you are not REQUIRED to. The FLSA is protection for non-exempts - it prevents an employer from NOT paying OT, it does not prohibit the payment of OT.

Sounds like you have an entire shop full of non-exempt salaried employees - if that is not the case, (and deciding the case is soley up to the employer) you do need to pay actual hours worked in the pay period. Also, abide by the laws of your state on OT, some states pay OT over 8 hrs in a day (like California, of course) - Virginia is over 40 in the work week.

Tammy

Shadowfax · July 2004

Ok. With post #9 I finally get it. I would bet you are violating state law which probably requires payment of wages for all hours worked in the pay period. If this were being posited under mi law, I think that is how I would see it.

Semi-Monthly Payroll and non-exempt

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