Exempt Status Payroll Errors

Before you make that deduction from an exempt workers payroll, listen to Pandy as she shares some of the most common mistakes made to a salary. Starting with a clarification of the classification of exempt status, she provides nine things to review to assure your compliant with your exempt payroll practices.

Transcript

Speaker: 0:20

Who is actually watching your payroll? Now let me rephrase that. Let's say this a little differently. Who's actually watching how your employees are being paid? You see, I actually was on site the other day, and I have to thank Shelly and Jeff and Scott for this opportunity. But we were talking about one of their employees, and the individual came in and we sat down and started talking to him, and he started actually telling us what he was doing and how he spent his day. A long time ago, oh gosh, maybe 10, 12 years ago, there was a woman by the name of Barbara Barrett, who worked here in at the Department of Labor in Cincinnati, loved this lady. I mean, she was no nonsense, straightforward, and she was a great teacher at the same time. Didn't maybe realize that. But I remember her telling me, look, when I go in to do a wage an hour audit, I'm not going to ask them what their title is. I'm not going to look at their job description. I'm ing to ask them, "what are you actually doing every day?" "What are your responsibilities?" "How do you spend your day?" And "how long do you do it, does it take you to do each thing?" And then we're going to talk about how you're getting paid and how the company is classifying or valuing you against the Fair Labor Standard . In this particular case, the individual was a supervisor in the warehouse. But what we found with the questions, with just asking all the you know, specific questions of what are you doing and how are you doing it, he was spending 99% of his time actually doing warehouse responsibilities. We didn't find him in the office. He couldn't take us back to the office and say, well, "I was I'm working on this report or I'm doing this or I'm doing that." He was manual labor, paid on an exempt status. And when we started looking at the hours he was putting in, it was very apparent we were not paying paying him correctly. The organization had to, and they were really good about it, but I had to sit down and go over look, here's the criteria, and here's what you're allowed to do, and this is what you're not allowed to do with an exempt worker under the Fair Labor Standard Act. Tahen we started, you know, talking about a few other things that we probably should keep an eye on. And that's where we get our list for today, because I want some of you to go back and really take a good hard look. I know we've in the past, about what we're allowed to do in regards to withholding funds or making deductions from an exempt worker. But there's a few here that maybe some of you have allowed to slip between the cracks. And this is important because we've said it a million times. You don't mess around with somebody's paycheck. That's not an area you want to go to. That's not an area you want to even consider. Let's pay them correctly, let's keep that on solid ground. You don't want someone to come to you and tell you, "I don't think I 've been paid correctly." So let's start with the list. So get your pencil and paper out.

Speaker: 3:53

One of my other phone calls that I got for a question was, we've got part-time exempt workers. And I kind of chuckled because I said, well, that's interesting. Because you do realize that we're not counting hours. With exempt workers, we're not tapping our wrist and watching the clock. We're making sure that the work is getting done, that they're meeting the expectations of the role, whether that takes 10 hours or 35 hours. Exempt workers are exempt workers. But you can classify somebody part-time if you're making sure that they're making at least $684, the minimum salary. So please be very cautious with that and make sure that if you're actually calling them part-time exempt, you're not going under that threshold. And you're not necessarily standing there tapping wrist and counting hours.

Speaker: 4:54

Another one I want you to think about is how many you are deducting for sick days. Now just be mindful. You can, if it's under the deductions of three or more, I get that. That's quite all right. If you have sick days actually as a benefit, you can have them classify that particular day or record that particular day as a non-productive day and as one of their sick days. But to withhold funds from them, if they're working the rest of the week and it's a sick day, you don't want to do that. You want to make sure that if you're going to withhold and deduct sick days, that they're doing more than one if they're working the rest of the week.

Speaker: 5:51

Let's talk about emergency closings because we're coming up into colder weather. When an exempt worker, again, has worked previously in the week, or if they end up working after the emergency has been released, we don't deduct that day if the entire company is closed for an emergency closing, that exempt worker still gets their negotiated rate for the full week. Let it sink in, because I know some of you are having trouble with that one.

Speaker: 6:25

What about how many of you have in your policy that an individual must work the day before and the day after a holiday? Yeah, you should. You absolutely should. And if they don't work the day before or the day after, and it's an unexcused absent, they don't get paid the holiday. If I did your handbook I know you've got it in there because I probably put it in there for you. But remember, an exempt worker, you can't withhold. You can't withhold if they're working sometime somewhere in that week, they still get their negotiated pay. Now, can you get them on attendance? Absolutely. You can still hold them to attendance if they call in and say, "I don't want to work the day before the holiday." That's your prerogative. But as long as they're working sometime in that particular week, they get their negotiated rate.

Speaker: 7:26

How about making partial day deductions for a personal event? And again, we do say if somebody wants to ask off and we've got work for them and they still take it off, we can deduct if it's, one of those situations where we say no, it's not approved, but they still go and do it. But if they have PTO, go ahead and apply the PTO. If they don't have PTO and they've worked previously in the week, you don't want to take that away, and we're talking about partial days. So if they're taking off a half day to go see the ball game for one of the kids or they're going to a doctor's appointment for a half day. We don't cut that half day off and only pay them four hours or five or whatever you want to pick for the time that they were there. You pay them for the full day because they worked the in that week.

Speaker: 8:30

How about docking for pay poor performance? And I do have individuals who get really upset and say, "look, it was just a waste of time. They shouldn't be paid, they weren't working, I probably should have just sent them home, so I don't want to pay them. I had to redo their work." Well, that's a performance issue, and you have to address it in other ways. Maybe they're not even qualified for the job that you have them in, and that's why you're having to redo their work, and that's why you've got the poor performance. That's another whole topic. But you can't dock or deduct because of poor performance. The FLSA will not permit you to do that.

Speaker: 9:13

You also have an option in the regs to suspend someone and withhold pay for that time of suspension. But ladies and gentlemen, you've got to make sure that's a serious suspension and you are treating others the same way, and it's part of your written policies. So you can't just send somebody home because you're upset with them and they're an exempt worker and think, okay, I'm suspending them for three days, so I'm going to dock their pay. Please make sure you've got a written policy stating that this kind of a violation from anyone will result in of a suspension of one to three days without pay.

Speaker: 10:04

I know this sounds like a long list, but I only have one more. And this one's only going to be relevant to a few of you. There's a problem sometimes with miscalculating the limits when using bonus to meet salary requirements. And I'm talking about non-discretionary bonuses. Remember, FLSA permits you to use 10% coming from a commission, an incentive,, a non-discretionary bonus as part of the number to configure or to meet the salary requirements. So you have to be very careful that you're not miscalculating that and you're not pulling back and saying, "well, you know what, I know it was non-discretionary when we started, but now I'm going to make it discretionary because I don't think you deserve it." You can't do that. You cannot do that.

Speaker: 11:02

An exempt worker has to be paid according to the requirements, starting with the classifications. Making sure that the individual, just like the gentleman that we started out with under an executive classification, those individuals are not supposed to be working manual labor. He no longer classified or fit the classification of exempt status. So if nothing else, go back and start reviewing whether your exempt workers truly are still exempt and then make sure that they're getting paid correctly. These things slip between the cracks. I get it, I really do. But thank goodness that Shelly, Jeff and Scott asked all the right questions, and this employee was willing to give us the truth so that we can make him non-exempt. He's now getting the overtime that he deserves. We didn't want to mess with his pay, and we don't want to treat him unfairly. So stick to the regs. They're there for a reason. Again, send in your questions. We'll get you the answers. Right here at the human resource.