First / Last Exempt Paychecks
Mel in CO
54 Posts
Before asking my question, I need to clarify some points related to my organization. We pay our employees on a bi-monthly basis. Everyone in the organization (regardless of classification) records the time that they work on certain projects. We utilize this record to bill back our customers for services that we provide – we are a computer consulting organization – and not for other purposes.
Our Accounting Supervisor just left our organization and one of the duties that were assigned to him (and his department) was the calculation of payroll for our organization. Since he has left, I (HR) have now been delegated the duty of overseeing payroll in our organization – no problems there. We recently had an exempt, salaried employee leave our organization and her last payroll check came into question. Upon this individual leaving the organization, one of our accounting specialists (who calculates the payroll) handed over her payroll information for me to approve. The individual, following our Accounting Supervisor’s previous instructions, broke out the employee’s salary to an hourly figure (based on 2080 hours / year), figured the straight 40 hours and then continued to figure out the overtime calculation. Upon further research, I also found that the supervisor also would pay new employees simply for the time that they worked, but (and this is the scary part) that he would simply pay them for the actual time worked and not for overtime. From the grapevine, I found out that his reasoning was that since they were “exempt” that they were exempt from overtime – but shouldn’t be paid for a full two weeks of work since they didn’t work two weeks and were not entitled to their salary.
Am I correct with my understanding of FLSA that the employee, since she was exempt and salaried, that she should simply be paid her “normal” salaried rate regardless that this was her final paycheck and regardless of how many hours that she worked? Are we not at risk of jeopardizing the exempt status of this position (and others) by paying the employee on an hourly basis when they are leaving (or starting with) the organization? My final approval was to simply pay the employee their normal salary on their final paycheck and not calculate the time on an hourly basis – was this correct? Any assistance would be greatly appreciated.
Our Accounting Supervisor just left our organization and one of the duties that were assigned to him (and his department) was the calculation of payroll for our organization. Since he has left, I (HR) have now been delegated the duty of overseeing payroll in our organization – no problems there. We recently had an exempt, salaried employee leave our organization and her last payroll check came into question. Upon this individual leaving the organization, one of our accounting specialists (who calculates the payroll) handed over her payroll information for me to approve. The individual, following our Accounting Supervisor’s previous instructions, broke out the employee’s salary to an hourly figure (based on 2080 hours / year), figured the straight 40 hours and then continued to figure out the overtime calculation. Upon further research, I also found that the supervisor also would pay new employees simply for the time that they worked, but (and this is the scary part) that he would simply pay them for the actual time worked and not for overtime. From the grapevine, I found out that his reasoning was that since they were “exempt” that they were exempt from overtime – but shouldn’t be paid for a full two weeks of work since they didn’t work two weeks and were not entitled to their salary.
Am I correct with my understanding of FLSA that the employee, since she was exempt and salaried, that she should simply be paid her “normal” salaried rate regardless that this was her final paycheck and regardless of how many hours that she worked? Are we not at risk of jeopardizing the exempt status of this position (and others) by paying the employee on an hourly basis when they are leaving (or starting with) the organization? My final approval was to simply pay the employee their normal salary on their final paycheck and not calculate the time on an hourly basis – was this correct? Any assistance would be greatly appreciated.
Comments
So, if I understood correct, converting the first partial week worked and the last partial week worked to an hourly rate was what your accounting department was doind. I would say that falls within guideline, without concern for overtime. We usually convert to daily rates instead of hourly rates, since we don't ever deduct for partial day abscences.
29CFR541.118
(c) Initial and terminal weeks. Failure to pay the full salary in
the initial or terminal week of employment is not considered
inconsistent with the salary basis of payment. In such weeks the payment
of a proportionate part of the employee's salary for the time actually
worked will meet the requirement. However, this should not be construed
to mean that an employee is on a salary basis within the meaning of the
regulations if he is employed occasionally for a few days and is paid a
proportionate part of the weekly salary when so employed. Moreover, even
payment of the full weekly salary under such circumstances would not
meet the requirement, since casual or occasional employment for a few
days at a time is inconsistent with employment on a salary basis within
the meaning of the regulations.
[38 FR 11390, May 7, 1973, as amended at 40 FR 7092, Feb. 19, 1975]
[url]http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_541/29CFR541.118.htm[/url]
Hope that makes sense.
Mel