Cutting Costs in a Wage and Hour Minefield

Times are tough and business is slow for a lot of companies, and in an effort to lower costs a lot of businesses are looking at ways to reduce their payroll expenses without having to lay people off. One of the popular approaches is to reduce hours or to actually shut down operations for a day or two each week or month. Good idea, but watch out, because if you're not careful, it may end up costing you more than you're saving!

How could that be you ask? Well, it has to do with how the federal and state wage and hour laws (primarily FLSA for those of you who like alphabet soup) handle overtime exemptions. Under FLSA there are two classes of employees, those exempt from overtime pay and those who are not exempt from overtime pay. We commonly refer to these as salaried and hourly. Not precise terms, but they'll do.

With hourly employees, you can do pretty much anything you want with their hours, so long as it doesn't violate things like union contracts or other employment agreements you may have with them.

With salaried employees it's quite different. In order to be exempt from the overtime pay provisions of FLSA you have to meet various criteria, including that they are paid a regular weekly salary, and that salary isn't tied to punching a time clock. So as soon as you tell them to go home on Friday and dock them a day's pay, you are violating that criteria, and they are no longer exempt from the overtime provision.

You don't want to have to pay all of your managers, sales people, and professional staff overtime pay!

So, what are your alternatives? There are several. You can ask them to take vacation days (or other paid days off) on the days you send everyone else home, you can have them take off time a whole week at a time unpaid, or you can reduce their salary (as long as it stays above $455 per week).

Sound complicated? Yes it is! And I've even left out most of the details. So if you are considering this and not sure how to proceed, give us a call at 515-314-9835, and we can help you through the minefield.

Finally, WHAT you do isn't as important as HOW you do it. Communicating these tough messages to your employees in a compassionate way, including them in the solution, and encouraging their input and feedback is key. We've had years of experience crafting and delivering messages like this, so call us for help.

Please visit our website at http://www.yourownhrpro.com/.