Exemption Classification change key talking points for Managers

  • Purpose of exemption status. The Fair Labor Standards Act (FLSA) outlines the criteria for positions to be exempt from overtime pay.  Job descriptions are reviewed periodically or when managers request edits to a job description, to ensure compliance with FLSA guidelines.

  • Definition of Exempt vs. Nonexempt. Per FLSA, all positions are considered nonexempt (hourly/biweekly payroll) and must meet the three-part test to qualify for exempt status (exempt from overtime/salaried/monthly payroll).  At any time that a position no longer meets all three parts, the position is considered nonexempt (hourly/biweekly payroll). If a position’s key responsibilities and/or pay grade changes and the position meets the three-part test, the position may be updated to exempt (salaried/monthly payroll).
    • Duties – must be exempt level work
    • Annual Salary – must meet the annualized salary threshold
    • Weekly Salary – must meet the weekly salary threshold
    • Positions that are nonexempt (hourly/biweekly payroll):
      • must adhere to timekeeping records requirements (clocking in/out)
      • qualify for overtime (actual worked hours greater than 40 per work week)
      • overtime must be preapproved by manager
      • paid on the biweekly payroll (26 pay periods per calendar year)
    • Positions that are exempt (salaried/monthly payroll):
      • do not qualify for overtime
      • paid on monthly payroll (12 pay period per calendar year)
    • Pay conversion from annual salary to hourly rate:
      • Annual salary is divided by full-time annual hours of 2080 (40 hours/week for 52 weeks per calendar year).
    • Pay conversion from hourly rate to annual salary:
      • The hourly rate is multiplied by full-time annual hours of 2080 (40 hours/week for 52 weeks per calendar year).
    • If a position is less than 40 hours per week, the annual hours are prorated and then the hourly or annual rate is calculated.

Examples

$52,000 annual salary will convert to nonexempt and is full-time at 40 hours/week.  $52,000/2080 = $25.00 per hour.

$52,000 annual salary will convert to nonexempt and is full-time at 35 hours/week.  35 hours/40 hours = 0.875 * 2080 = 1820 hours.  $52,000/1820 = $28.5714

$35.75 per hour will convert to exempt and is full-time at 40 hours/week.  $35.75 * 2080 = $74,360.

$35.75 per hour will convert to exempt and is full-time at 35 hours/week.  35 hours/40 hours = 0.875 * 2080 = 1820 hours.  $35.75 * 1820 = $65,065.

Benefits

  • Eligibility will not change unless the employee has a life event that qualifies them for a change in benefits (e.g. marriage, birth or adoption of child, etc.)
  • Benefits and other deductions (excluding taxes and retirement, etc.) will be deducted:
    • Monthly – deducted once each month in the full amount
    • Biweekly – prorated each pay period within the month (months with 3 payrolls, the last payroll will not have a deduction)
    • Pay period transition samples will be provided to help each employee determine what their pay checks may look like for the transition period

 

Next Steps

  • Managers will work with their HR Business Partners to process the changes
  • HR Business Partner will provide employee letter and transition sample document to the manager
  • Manager will communicate changes with employee(s) and provide employee letter and transition sample document
  • Timekeeping training is provided for those transitioning to nonexempt