BPHR’s Director Lisa Salcido, SPHR, SHRM-SCP provides answers to your pressing HR questions.
Question: We had been misclassifying our employees as just hourly or salaried and not also as exempt or non-exempt. Thank you for your help identifying and correcting this before our Department of Labor audit. What’s the best way to communicate to employees about their new exemption status? Some are losing their overtime and others will have to start punching in and out.
Answer: Shifting employees to their new classifications can impact morale so you’ll want to be transparent about the law and why the reclassification has occurred. Provide an explanation of how the federal Fair Labor Standards Act (FLSA) requires all positions to be classified as exempt or non-exempt. Exempt positions meet very specific criteria such as a minimum salary amount, salary pay basis and specific job duties. Positions that do not meet these criteria are non-exempt and the law requires that non-exempt positions be paid overtime.
The best way to communicate this change is an honest discussion and in writing. You can share how your Balance Point Human Resources (BPHR) Generalist carefully evaluated each position and how the determination was made to reclassify. I would also recommend providing a reclassification letter that outlines the effective date of the change, their new exemption status and how the change will impact pay calculations and any timekeeping requirements.
Employees who are now classified as exempt and will be paid on a salary basis, are exempt from overtime pay requirements. These employees are now eligible for some additional benefits your company offers only to exempt employees such as vacation, long-term disability and life insurance. If your employees are concerned about the loss of overtime pay, I would emphasize those benefits as an advantage of the reclassification.
Employees who have been reclassified as non-exempt and will be paid on an hourly basis, will be asked to track all hours worked. It’s important to emphasize that this reclassification is not a demotion but will allow them to be correctly compensated if they work more than 40 hours in a workweek, since they are now eligible for overtime pay. Prepare for an adjustment period for some who may resent being required to log their time and won’t be able to work off the clock without approval.
Start talking to your employees in advance of the changes so they can understand that this is about complying with the law and does not reflect on their performance or standing with the company.
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Want to learn more? Have a question for Lisa? Email her directly.