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I can see why employers might hire hourly employees - you pay employees for the amount of time they spend working. Straightforward. Likewise, salaried exempt makes sense - you pay employees a fixed rate to get a job done, and expect them to spend however long it takes to get it done.

But salaried nonexempt is weird. You don't get to pay the employee less if they spend less time working (barring full days of nonwork), but you still have to pay them extra if they work overtime. What factors would lead an employer to pay for a nonexempt position on a salary basis?

I figure that a salaried nonexempt position is probably more attractive to candidates than an hourly nonexempt position would be, but aside from that, nothing comes to mind.

(I've tagged this [united-states], since that's what I'm most familiar with, but this may as well apply to any country where the notion of "salaried nonexempt" exists.)

  • He benefits from having happy and loyal employees. – Dmitry Grigoryev Dec 23 '15 at 9:09
  • Keep in mind that in the United States, the decision between exempt and non-exempt is not supposed to be a "choice", but is dictated by the type of work and the individual's responsibilities. – psubsee2003 Dec 23 '15 at 9:21
  • @psubsee2003 Yes, I'm aware of that. The distinction I'm trying to draw is not between "salaried exempt" and salaried nonexempt", which is not how it works; but rather between "hourly nonexempt" and "salaried nonexempt". – senshin Dec 23 '15 at 13:31
  • I'm a bit unclear on how salaried exempt actually works. You get tasks, and whether you finish them in 10 hours or 100 hours you can go home after finishing them? Is there some kind of limit? Surely an employer couldn't expect you to work 150 hours in a week to finish a task? – Andrew Whatever Dec 23 '15 at 17:38
  • @AndrewWhatever While state laws differ (I think e.g. California is employee-friendly in this respect), FLSA imposes no limits on how much time salaried employees can be required to work. If your employer asks you to complete a 150-hour task in one week, and your employment contract doesn't prohibit your employer from doing that, your recourse is pretty much to quit and find a new job. (Consider investment banking, which is salaried exempt - it doesn't quite get as bad as 150-hour weeks, but I'm told that 100+-hour weeks happen fairly often.) – senshin Dec 23 '15 at 17:47
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Anything that is a benefit to the employee is a benefit to the employer, because it attracts better candidates.

An obvious use of salaried non-exempt is in jobs where hours are relatively fixed and the amount of time spent on the job is important rather than the amount of work done. Examples include receptionists, high end retail, high end phone centre. Police, Fire, EMS are also usually salaried non-exempt.

Being non-exempt is appealing to workers who don't want to be asked to work extra hours, because they know the company will only ask if its absolutely necessary (since it costs them money). Being salaried appeals to workers because they can't have their hours cut whenever the employer feels like it. Better employees in those cirumstances are going to choose positions which are salaried and non-exempt, and may well prefer a fixed salary (and fixed income) over a higher hourly rate where the hours can be cut.

  • Ah, very good point - I hadn't considered fixed-time jobs like receptionists/etc. – senshin Dec 22 '15 at 16:03
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    @Joe but, we're speaking english where context is everything. i think the meaning is clear from the context. there's no need to be absolutely literal in every single thing you say—not how language works. programmers may feel differently, but they're in the minority. – Apologize and reinstate Monica Dec 22 '15 at 21:28
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    @sgroves, Actually, I think "can't" is too strong. As you say, context is everything. In this context, we are talking about legal distinctions about jobs. In that strict a discussion, "can't" is absolute and I'm not sure that is correct in this context. – cdkMoose Dec 22 '15 at 22:19
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    It is that strong though. They can't cut hours whenever the employer feels like it. That's not to say they can't cut hours, but as soon as they do all the people who are there because of the promise of consistent hours start looking for a new job. An employer who does cut salaried hours on a whim won't be in business for long. DJ's statement is perfectly valid. – corsiKa Dec 22 '15 at 23:55
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    I think your bolded premise is very strong. Not sure most employers think like that, or act like that. – Taladris Dec 23 '15 at 3:54
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In the United States, the issue of exempt versus non-exempt is determined by the Fair Labor Standards Act and is administered by the US Department of Labor. To complicate the issue further, some states have wage and hour laws, which may add more requirements than the FLSA.

Non-exempt employees are entitled to overtime pay whereas exempt employees are not. Whether a non-exempt employee is paid an hourly rate or an annual salary rate, if they work overtime there will still be a calculation to determine their hourly overtime rate.

Under some contractual obligations, there can be conditions where even exempt employees are paid an overtime rate (e.g. working a Holiday).

There are any number of what ifs as to why a company would salary a non-exempt employee. A negotiated contract may stipulate that everyone is salaried, which could make payroll easier if they are paid say twice a month rather than every two weeks. Being an IT guy, I'll throw out a what if that I've lived with more than once. It's entirely possible the company has an ancient, 30+ year old, ramshackle, Mainframe COBOL, "ERP Solution" (and I use that term loosely) which requires an annual salary to be entered for EVERYONE, exempt or non-exempt.

  • The use of the term 'supervisor' has come into practice lately to be that retail employee the employer takes a crap on. They get a slight bump in pay if they actually only worked the 40 hours, but they end up covering missed shifts, opening, closing, and often work 60 or more hours. Obama is trying to raise the bar on this and would move more people into that exempt category you are talking about. – Bill Leeper Dec 22 '15 at 20:45
  • twice a month rather than every two weeks -- aren't those two the same..? Also, an example I've seen of being a salaried nonexempt is a special employee that just has extra/indispensable responsibilities, and has to work extra hours on a somewhat regular basis. Not very common but does happen. – unknownprotocol Dec 23 '15 at 4:14
  • Only in Februari in non-leap years. All the other months are not exactly 4 weeks. – Erik Dec 23 '15 at 8:20
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    Twice a month means 24 paychecks a year, usually on two specific days. For me, that's the 10th and 25th. Every two weeks means 26 paychecks a year, usually on a specific day of the week. – Kennah Dec 23 '15 at 16:19
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Attract talent. As an employee I am guaranteed a set amount and if I work more I get paid more.

As an employer if you have a swing load you offer a lower guaranteed salary and explain during load you are expected to work extra hours but get paid more for it.

In sales you get base pay plus commission.

1
  • Employee happiness
  • Fairness between salaried and non-salaried workers (in terms of overtime)
  • Employees are often far more likely to be flexible and undertake overtime

If you think in pure terms of getting maximum employee hours for your money, it makes little sense: but keeping your employees happy is often under-rated, particularly in the US. In Europe a salaried non-exempt employee (although that exact phrase isn't usually used) is a fairly common thing

  • "Fairness between..." doesn't make a whole lot of sense to me. If you're hiring for a nonexempt position, you have to pay the employee in question overtime, irrespective of whether they're salaried or not. So fairness in that respect is there anyway. (Right?) – senshin Dec 22 '15 at 16:02
  • Fairness between salaried and non-salaried - not between exempt and non-exempt – Jon Story Dec 22 '15 at 16:05
  • I guess I'm not seeing what you mean by "fairness" here. The decision for an employer who has to hire for a nonexempt position (say, a receptionist) is to either pay the employee on an hourly or salary basis. Choosing to use salary instead of hourly does not affect the computation of overtime pay for the employee; from the employee's perspective, they're getting paid overtime either way. – senshin Dec 22 '15 at 16:09
  • Perhaps I'm misunderstanding your question, then - I thought you were asking why you'd use non exempt over exempt. For the receptionist for example, the salaried non-exempt option means they're guaranteed a set number of hours but with optional paid overtime. Hiring them hourly may not guarantee the hours, while hiring them exempt may mean they aren't willing to do overtime. The receptionist gets the security of knowing they have a minimum income but without losing the paid overtime if they were hired exempt – Jon Story Dec 22 '15 at 16:24
  • No, sorry, the contrast I'm trying to draw here is not between nonexempt and exempt. Since exempt-ness is an inherent feature of a given job description, the employer does not have liberty to choose not to pay overtime for a position that is nonexempt. What I'm getting at is: conditional on the employer having to hire for a position that cannot be treated as exempt, why would they choose salaried nonexempt over hourly nonexempt? – senshin Dec 22 '15 at 16:29
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I think people have missed one large (potential) benefit. There are a lot of positions out there where employees bill clients for their time, directly. The employee is salaried, but each week that employee logs 40 hours of billable time. The client gets billed for each hour at some agreed upon rate.

In a true salaried position, with no concept of overtime, a lot of people are going to try really hard to stay at 40 hours a week (or whatever the minimum in their contract is). They don't see any immediate benefit for working 41 hours or 42 hours. A lot of people won't bother.

In a salaried-nonexempt role, the employees now have motivation to work overtime. If they work 41 hours, they'll see that reflected in their paycheck. If they work 45 hours, they'll see even more in their paycheck. Suddenly, staying an extra 30 minutes each day while traffic thins out seems like a great idea, when it means the equivalent of a ~6% raise.

Even though the employer is paying the employee more, the employer is actually coming out ahead...the billable rate the client pays is significantly more than what the employee gets paid. Most of the additional costs the employer has to pay (office building/health insurance/marketing/hr/etc/etc/etc) are the same regardless of how many hours the employee works. 40 hours a week or 60 hours a week, the office building costs the same amount.

Bill the client @ $150 for those extra hours of work. Pay the employee @ $50 for those extra hours of work.

The difference goes into the pocket of the company.

It can be win-win-win for everyone. Lots of clients want things ASAP, and would rather have the work done sooner, lots of employees appreciate the extra money, and the company gets extra income, brownie points with the client, and a huge plus when recruiting compared to companies that don't offer similar compensation packages.

0

I know of no compelling reason why an employer would want to do this, other than to simplify things by making everyone salaried. I think it's misguided, since you must still track hours for these folks, and still pay them overtime when required.

According to http://www.shrm.org/templatestools/hrqa/pages/whatisthemeaningofsalaried,nonexemptemployee.aspx there's no real benefit for the employer.

Designating an employee as salaried, nonexempt is appealing, especially for small employers that have mostly exempt employees and do not outsource payroll. However, the designation has no real benefit for an employer. It blurs the line between exempt and nonexempt status and may lead to difficulties.

  • I like your answer. I would answer similarly and include what you wrote however, I think the benefit to the employer is "avoid employee lawsuits" and "follow labor laws"; in other words, it is a non-punitive benefit, unlike the popular answers to this question. – Jim Dec 22 '15 at 20:20
  • I think there is a benefit for the employer. Its advantageous to the employee and thus attracting better candidates. Most jobs in Germany work out to something like this. Where you're salaried full time, but if you have to work overtime, they company has to pay double or 1.5x for that. Thats good because it keeps overtime as last resort for the company and generally ensures they won't abuse it. – Magisch Dec 23 '15 at 7:59

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