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I have a newer hire (manager level), Bill, who doesn’t understand the definition of salaried exempt status. He tracks his hours worked and thinks that because he worked more hours than the pay period, he shouldn’t have to use PTO or vacation for days off within the pay period. We do not have a comp time policy.

What’s an easy, simple way to explain that it doesn’t matter the number of hours you work, you are paid to do a job? Sometimes you work more, sometimes you work less.

This is a common problem! People are accustomed to being paid by the hour, and switching to a salaried exempt position can feel somewhat unusual. Managing exempt employees can also be a bit complicated, as you want to balance work demands without overwhelming or taking advantage of your employees. Let’s get into it.

What is a salaried exempt status?

The Fair Labor Standards Act, which governs the compensation of most employees in the United States, divides people into two categories: Those who are subject to the law (non-exempt) and those who are not (exempt).

You must pay non-exempt employees by the hour, and they receive a minimum of one and a half times their regular rate for any work over 40 hours in a one-week pay period (federally). California has an additional requirement that requires you to pay overtime for any work exceeding eight hours in a single day. There are some exceptions to this, but that’s the general rule.

Exempt employees receive a flat salary, and regardless of whether they work two hours or 90 hours in a week, their paychecks remain the same. Now, this is an excellent deal for the employee if they work fewer than 40 hours a week but a terrible deal if they regularly work 60 hours a week.

Importantly, there are rules around who can be exempt. Many people prefer to be exempt because they don’t have to track every minute, and they always know their paycheck amount. However, they must meet strict qualifications. First, in California, the minimum annual salary requirement is $68,640. (Federal law requires a much lower yearly salary of $35,568.) Second, they have to meet a duties test.

The duties test requires them to hold higher-level roles. They must manage multiple people, work as an independent professional, such as a CPA or scientist, or meet one of the other qualifications. You can’t simply declare someone salaried exempt just because you want to.

I’m going to assume your employee is classified and paid correctly! If not, the rest of this won’t apply.

Understanding the practical nature of being exempt

Bill is tracking his hours and thinks (understandably!) that if he works 50 hours this week, he should be able to work 30 hours the following week. That is a logical assumption, and some companies do try to keep their exempt employees balanced in this way. After all, the last thing you want is to burn out your employees through overwork.

Exempt employees are hired to do a job, but that doesn’t mean they can come and go as they please. Employers can set schedules and deny vacation requests, just as they can with hourly employees.

How do you explain this to your employees?

It’s highly possible no one ever explained what it means to be exempt. So just be straightforward and honest, even if he won’t like it. Say something like this:

Hey, Bill, I know you are new here, and I think I’ve been remiss in not explaining policies to you. First, you’re salaried exempt, which means your paycheck will remain the same regardless of the number of hours you work. We generally expect you to work approximately 40 hours per week over five days.

You need to work every day, Monday to Friday. Some weeks, you’ll work a little more, and some weeks a little less, but the standard is to be in the office (or logged on, if you’re remote) from 8:30 to 5:30 every day, with time taken for lunch.

We don’t do comp time — and most companies don’t — so even if you work 60 hours this week, you’ll still be expected to be in the office all next week. If you want to take a long lunch here or there, or leave early for an appointment, that’s fine! But, if you want to take more than four hours off in a single day, you’ll have to use your PTO balance to do so.

Remind him he doesn’t need to track his hours (although he’s welcome to do so). And then, if he tries to take days or hours off without charging them to his PTO, you’ll have to correct him.

Chances are, the conversation will fix the problem. Each company operates a little differently, and if he’s new to exemption, he probably thinks he’s entitled to comp time. So just let him know!

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