What Should I Consider If I Want to Make an Employee Salaried?

When a small business owner decides to take an employee to salaried status, the key to the transition is that it should be legal, as well as a win/win for both the organization and the employee. Salaried employment is becoming more and more of a hot topic considering there are significant changes being made in the workforce.

The key is to create a happy balance between being reasonable with job requirements and duties and understanding the needs of the employee. Transitioning an employee to exempt or nonexempt will be based upon industry and anticipated salary expectations. There are several key points that a company may want to be aware of if they are wanting to take a position to salaried status:

• There are legal ramifications: The definitions and rules regarding exempt and nonexempt employees may be changing for 2016. Currently there is a salary expectation minimum for white collar employees of $455 a week, which, for a 40-hour work week equates to around $11 – $12 an hour. This means that an employee in a white collar position can be placed on salary status. This is an annual salary equivalent to approximately $23,660.
• Salaried employment must be mutually beneficial: There are various reasons why an employer may want to take an employee to salaried status, but the key is to ensure that it is a mutually beneficial relationship and that the employee understands why. Reasons may be to allow flexibility in the role, with fewer time restrictions and obligations. Also, if the workload is complete in a lesser amount of time, there isn’t a requirement to work a complete eight-hour day. It should be a selling point.
• Salaried employees shouldn’t be taken advantage of: One of the reasons that the government is issuing a revision to the standard for salaried employees is because employers have taken advantage of the salary privilege. Employers have been pressing 60 – 70 hour work weeks, which equates to no work/life balance. There are several positions that that level of commitment is to be expected, but those employees are accommodated accordingly. Hence the reason for the proposed change in salary regulations for 2016. The suggested salaried employee expectation would equate to $921 a week, resulting in an annual salary of $47,892. This would be the minimum salary requirement. In other words, and employee would need to make at least $23 an hour to be considered in compliance with regulations.

Just keep in mind that there must be a legitimate reason to take someone to salary status. It surely shouldn’t be perceived as an expense cutter or a method to maximize your workforce under limited conditions. i.e., funds. The key for a transition to salaried employment is to allow flexibility in the position. Some people prefer to work as salaried employees, just because it’s less restrictive. Some employees prefer hourly because it is restricted.

Changes in how you handle paying employees could influence your work culture. So be aware and mindful of how the shift in how you pay employees changes that dynamic. You want your employees to tell human resources they are happy!

If you don’t have a human resources professional to consult and want to talk more about employee pay options – and the impact on your business, you can reach me at hrservices@payrolldepartment.biz. I’m pleased to be a part of the services offered by The Payroll Department – now we are not only the payroll processing department, but your Human Resources department, too!

-Gerilyn Davis, The Payroll Department HR Services