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Salaried But Not

September 8th, 2017

“Just to make things easier for me, I pay everyone a salary. What are my risks with doing this?”

Your HR Survival Tip

Where do I begin? Let’s talk about what being salaried really means. Bottom line, a salary is much more of a payroll term than a legal term. When HR professionals say someone is salaried, we are implying the employee is exempt. Exempt is the legal term to show an employee has met one of the legal exemptions from overtime pay, rules about meal and rest periods, etc. When payroll uses a salary, they are merely saying the employee gets paid the same amount each pay period.

The problem is, over the years, the terms “salaried” and “exempt” no longer carry distinct meanings for many companies and employees… and, oops, you just fell into a big hole when you don’t remember there are legal consequences for confusing those terms.

Your payroll system will usually ask if the new employee you’re adding will be on a salary or hourly. Why do they ask the question that way instead of exempt or non-exempt? Because most people either aren’t familiar with the terminology or they don’t know how to determine (legally) if someone is truly exempt. Choosing “salary” works for payroll but that doesn’t make it legal.

So often we hear non-exempt (hourly) employees are put into payroll as salaried “because it’s easier.” However, why on earth would you think it’s easier?

  • You still need to have non-exempt employees complete a timecard. The timecard is your only proof those employees were paid correctly.
  • Every payroll period you have to reconcile their salary amount against their time card to determine they were paid at least as much as owed.
  • If they worked more regular hours than the salary covers, you need to add that amount to the salary to avoid claims for late payment.
  • If they worked ANY over time, you must add that on top of the salary because a non-exempt’s salary can’t legally include overtime in California if the employee is really non-exempt hourly.
  • If your payroll is set for semi-monthly (twice per month), you have a huge risk because a semi-monthly salary defaults to 86.67 hours per pay period. Are those non-exempt hourly employees actually working 86.67 hours or are they really working 80, 88, or 96 hours? You’re paying too much or too little at least once per month and the state would love to hear about you.

With all the reconciliations and changes, you need to do each pay period to pay that salaried non-exempt employee correctly to avoid wage and hour law claims, where exactly is there less time and effort involved? Make it truly easy on yourself and put your non-exempt employees back to hourly in payroll so you just have to enter hours worked… isn’t that easier?  … Click here to read on >>

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