Benefits and Compensation

Ask the Expert: Paying Exempt Employees Overtime

In our latest installment of Ask the Expert, brought to you by the team of industry experts at HR Hero®, we look at a recent question from a subscriber regarding additional non-exempt compensation for an employee who recently moved into an exempt position.

primary duty compensation

Q: We have a non-exempt employee who recently accepted an exempt position with our company. We are considering asking him to come back in on the weekends to help with his previous non-exempt job, however he would hit 40 hours of exempt work before Saturday. If he would do non-exempt work on weekend are we required to pay him at his new hourly rate or previous hourly rate? Would his time on Saturday’s be overtime even though his status is Exempt?

A: You can pay the employee on an hourly basis, but he may no longer be an exempt employee. If you want to maintain his exemption, and assuming his part-time job duties continue to meet the exempt status, you need to pay him the minimum salary required.

Exempt salaried employees often want to work additional hours for their employer doing nonexempt work (such as data entry) to augment their salary. If this work is paid on an hourly basis, the employee may no longer be exempt, and overtime will be owed, including overtime for hours over 40 per week that the employee works in his or her formerly exempt job. This problem can be avoided by paying the employee a fixed salary for the second job that does not vary from week to week based on the number of hours worked. In addition, the hours worked in the second job must not be so large that the employee’s “primary duty” is no longer work that qualified for the professional, administrative, or executive exemptions.

An exempt administrative, executive, professional, computer, or outside sales employee must have as his or her primary duty work that meets the first requirement of the standard duties test for the particular exemption. A determination of whether an employee passes the primary duty test is based on all the facts in a particular case. The amount of time spent in the performance of the required duties is a key factor.

Defining Primary Duty

In the ordinary case, “primary duty” means over 50 percent of the employee’s time. However, time alone is not the only test. For example, an employee who does not spend over 50 percent of his or her time in managerial duties might still have management as his or her primary duty if other pertinent factors are present.

These factors may include:

  • The relative importance of the executive duties as compared with other types of duties
  • The amount of time spent performing exempt work
  • His or her relative freedom from supervision
  • The fact that his or her salary is greater than the wages paid to other employees for the kind of nonexempt work performed by the executive

So, if the employee is paid on an hourly basis, even part-time, he may no longer meet the exempt definition for salary basis. This means you must maintain records of his work hours and pay him overtime for any hours worked over 40 in a single workweek, among other requirements. Alternatively, you may maintain his exempt status by paying him a salary of at least $684 per week (the current minimum salary requirement) as long as his job duties still meet the exempt status requirements.

For additional insight, The National Law Review provides an informative article discussing this very issue here. With that being said, we ultimately recommend speaking with an attorney to ensure the employee is able to maintain exempt status under the desired setup.

Ask the Expert is a service provided to subscribers of BLR®’s HR Hero product, where experts are ready with answers to your organization’s unique questions surrounding HR compliance. To learn more and request a demo of HR Hero, click here.