How casual is your timekeeping system? Do employees jot down their hours and record them later? How do you treat exempt vs. non-exempt time tracking?
These are important questions when it comes to keeping your company within employment law. Exempt employees are handled quite differently from non-exempt. Let’s answer these questions and look at timekeeping requirements to keep in mind.
Exempt vs. Non-exempt
According to the Fair Labor Standards Act (FLSA), which governs minimum wage, overtime pay and working hours, employees are divided into two categories: exempt and non-exempt. Non-exempt employees are entitled to overtime pay, and exempt employees are not.
Some employers confuse these terms with salaried and hourly, but they’re not the same thing. You may have both salaried exempt and salaried non-exempt employees. However, all hourly employees are non-exempt and qualify for overtime; there is no such thing as an hourly exempt employee.
The U.S. Department of Labor classifies some jobs as exempt vs. non-exempt by their job category. For example, all outside sales jobs are exempt and inside sales jobs are non-exempt. When jobs don’t fall into an easy category classification, their status is based on pay level, how they’re paid, and type of work.
Exempt Employee Pay
As long as an exempt salaried employee works any hours during a work period, they are entitled to their full amount of base pay. This is why many employers don’t require salaried employees to clock in or track their time. They figure it doesn’t matter, because the employee will be paid the full amount either way. The FLSA does not limit the amount of working hours an employer can expect of exempt workers.
However, nothing in the FLSA prohibits employers from requiring exempt employees to clock in or track time either. Tracking time is a good idea, because it prevents disagreements between the employee and employer. It gives employers a solid picture of the employee’s value to the company and makes things like time-off scheduling and benefits administration easier.
Perhaps the most pressing reason to track time for exempt employees is that federal rules still require employers to preserve all employment records. This means if you’re too lax with exempt employees keeping track of their time, your company could quickly fall out of compliance with the law.
Methods of Tracking
The FLSA doesn’t require or recommend a particular method of timekeeping. As long as accurate records are kept, employers can use timesheets, punch cards, time clocks, or really any system that is preferred. However, if your record-keeping is too casual, it can quickly get out of hand.
As an example, let’s say you have a salaried exempt events coordinator. She does her daily work, running company events, without really tracking her hours. She figures she’ll jot it down at the end of the month, but is very busy and forgets month after month.
In this situation, is your company in compliance with the federal rule to preserve all employment records? Probably not. Do you know whether the employee has used any vacation or sick time? Not really. A lax system is letting you down.
Ultimately, the company is responsible for the accuracy of time records and will be held to account by the federal government for mistakes and omissions. To address these issues, many companies now use payroll software and professional payroll management services.
Click Below to check out our new free resource - the NYS Minimum Wage and Overtime Salary Threshold Guide - which will help you understand the regulations when it comes to properly classifying your employees.