Salaried Nonexempt Position – The Pros and Cons

HR Compliance
Wage & Hour
Compensation Planning

Download Now

Must be a member to download. Please log in. Learn how to get access. Download

When employers evaluate their pay practices, there are times when paying a nonexempt classified employee a salary may be considered. Under the Fair Labor Standards Act (FLSA), employers are allowed to pay nonexempt employees a salary, as long as that salary is sufficient to provide employees at least the minimum wage for all hours worked and overtime is paid for all hours worked in excess of 40 in a standard workweek. Some employees who have traditionally been paid on a salary basis and are reclassified as nonexempt may not be overly excited about being paid by the hour.

Some employees paid on a salary basis, rather than an hourly basis, may feel that is a reflection of their status (especially if there are benefits tied to being salaried, such as more vacation days) and flexibility. Requiring employees to begin tracking their time can seem like a demotion and a restriction to the flexibility they once enjoyed.

In an effort to counteract some of this negative perception, some employers opt to implement a "nonexempt salaried" approach. Organizations utilizing this method will pay the hourly nonexempt employees a regular weekly salary much like they were paid when they were "exempt salaried." However, because these nonexempt employees are now eligible for overtime pay, the employer must also pay the employees 1.5 times their regular hourly rate of pay for all hours worked over 40 in a workweek. There are pros and cons for both the employee and employer with this approach...

Exempt Classification header image