Human Resources (HR) Publications

It’s not a demotion: How to tell salaried employees they are becoming hourly

By: Judy Kneiszel

Publication: Employee Relations Management Today

Date Posted: Oct 11, 2019

In late September, the Department of Labor (DOL) increased the minimum salary for “white-collar” exempt employees (i.e., executives, administrators, professionals) from $455 to $684 per week (or $35,568 per year).

This change takes effect on January 1, 2020, so you may now find yourself in the throes of deciding what to do about exempt employees whose pay is higher than the previous threshold of $23,660 per year, but not above the new threshold.

One choice, of course, is to increase the salaries of those workers to get them over the threshold. The other option is to reclassify employees who are currently exempt from overtime pay and make them nonexempt (hourly).

If the latter option is chosen, be prepared for questions and possibly pushback. Many in the workforce view a salaried position as having more status than an hourly position.
 

Breaking the news to reclassified employees

Here are some points you may want to cover when telling an employees they have been reclassified:

1. It’s not a demotion. Reclassification is a matter of compliance and has nothing to do with job performance.
2. It’s not a pay cut. Employees’ new hourly rates were likely calculated so they take home the same amount each week that they did when they were salaried.
3. It may be a pay raise. Eligibility for overtime guarantees employees will be paid for all working time. If they work more than 40 hours a week, they’ll have to be paid one and one-half times their hourly rate for any overtime hours.
4. If it’s not a pay raise, it may mean more time off. Reclassification can improve work-life balance because instead of feeling pressure to stay late at the office every night, employees can justify heading home when their eight hours are up.
5. Flexibility has not necessarily been eliminated. Workers will have to log their 40 hours, but they may have flexibility as to when they begin and end their workday, or how that 40 hours is broken up over the course of the workweek. If this is the case in your workplace, stress this with those who are being reclassified.
6. It’s easy. Time tracking may be new to employees who used to be exempt, but it doesn’t have to be difficult. For a smoother transition, thoroughly train affected employees and their managers on time-keeping procedures. Review policies on overtime, explaining when and from whom they must get permission to work more than 40 hours a week.
7. No off-the-clock work allowed. Any work done after hours or on weekends must be tracked. Formerly exempt employees who answer work phone calls, texts, and emails at home may not even realize they are working overtime. But that could leave their employer open to compliance problems.

In addition to any on-site staff being reclassified, be sure to share this information with any remote employees who will be impacted by the change.

You may also enjoy the following articles:

Benefits communication: How to improve your strategies

Protected leave laws: Are your employees guaranteed time off?

Coming to a state near you? Recreational marijuana complicates workplace drug policies

View all HR-related articles...

The Wage and Hour Compliance Manual provides critical information to help you comply with the Fair Labor Standards Act (FLSA) and state wage and hour laws. It serves as a go-to resource for anyone involved in employee classification, payroll and recording/tracking hours worked, as well as anyone with compliance obligations. 

Click here to sample this manual for free or view our full library of HR compliance publications.