Small Business Spoonfuls Podcast

SBS 001: Can all of my employees be salaried exempt?

In today’s Spoonful I am discussing the basic criteria a position in your company must meet in order to be classified as Exempt from minimum wage and overtime laws. Can everyone in your organization be Salaried Exempt?

Listen in and find out the answer to this question and more! Also, stick around and find out which TV show made the cut today for HR Superstar status! Maybe it’s a good example and maybe I bestowed this honor for being a cautionary tale to us all. Either way, you will go mad when you see how this one ends!

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Small business spoonfuls is a twice a week Q&A with Lisa Smith providing the answers to questions you have about running your small business.

Good morning, hello, I hope everybody is doing okay today.   This is Lisa Smith coming to you from Atlanta, GA.  I am super excited to be kicking off my small business spoonfuls Question and Answer broadcast.  This is something I ve wanted to do for a long time.  I ve traveled around the country for a few years giving courses to small business owners and managers and supervisors on a variety of employment related topics.  My husband and I have been small business owners for a few years, well a few years.  I like to flatter myself and think I m not as old as I really am, but probably more than 20 years now.  I am super excited to be able to answer the questions that I get from my audience around the country.  As you may or may not know, I am the creator of beauditsecure.com.  Our Q&A small business podcast here is always brought to you by the folks at beauditsecure.com which is me and my husband and the rest of my family and some great virtual assistants who are out there helping us make it happen every day.  Come check us out.  We have a great free content library full of videos and audio files that small businesses can definitely benefit from.  Come and get it.

Okay, well, let s get into our question for the day.  Today s question is can all of my employees be salaried exempt?  The answer to that is going to be probably not.  I hate to rain on that beautiful parade that a lot of employers have going out there, where you have all of these employees and you think, you know what, it s just going to be so much easier if I can just pay them all a salary and not worry about tracking their time. Most employers will say I will make it generous, make sure they are covered. They are definitely going to make above minimum wage.   Usually they make 2-3 times minimum wage, but when we start calculating in the overtime they put in, who really knows what that hourly rate is.

That is why the Department of Labor has said no.  There are very specific guidelines about who can and cannot be salaried exempt.  If you are just listening and kind of a new business owner, new employer and you are not really sure what salaried exempt means.   It actually means that this position qualifies under federal guidelines to be exempt from minimum wage and overtime payments to the person who is holding this position.  What we have to keep in mind is this has nothing to do with the person or the relationship you have with the person.  It also has nothing to do with the title you give the person.  You could call this person the Chief Executive of Candy Land but if their job, the duties that they perform for you, if that would include something like sweeping up the peppermint pieces, then the federal government has said that is considered a blue collar job and those kinds of jobs are protected under federal law for minimum wage payment and overtime.   Think about that.

The duties are very specific.  They are broken into about 6 different categories for someone who can be holding an exempt position.  You always need to have a good job description written down and very closely spelling out what duties this person is going to be performing.  If you are ever audited by the IRS or the Department of Labor, one of the first questions they are going to ask you is, let me take a look at the job description.  That is going to be super important.  You are going to have to have a job description.  A lot of small business have not had the time or the money to invest in creating job descriptions.  That is going to be something you are really going to have to look into and think about how you can make that happen.  We do have a link out to a job description builder that is awesome.  It contains great data from the Bureau of Labor Statistics.  If you come by beauditsecure.com we will be able to tell you a little bit more about that.  Definitely make sure you have that in place.  Once you have a good job description, you are going to match it up against the Fair Labor Standards Act guidelines for an exempt worker or an exempt position.

If it matches up with one of those 6 tests you can run, then clearly you are going to be set.  I hate to rain on that little parade but the Department of Labor has made it really clear and the IRS for that matter, but this is really a DOL issue. They have made it very clear if they come in to audit and they see a large number of exempt workers, then that is going to be something they really explore.   You want to make sure that we are not just taking advantage of an exempt guideline or an exempt status thinking anybody can be exempt and we just have to pay them above minimum wage on a regular basis, because that is really not the truth.  You can go to DOL.gov and you can fight through that website if you want to and find all of those exempt categories.  We have videos on that at beauditsecure.com.  We are going to be talking about that more here on spoonfuls.  As we go through, we are going to be breaking down more of that information for you.  It is actually very detailed and at the moment the Feds are getting ready to issue brand new guidelines for us.  I hate to go into too much detail with you right now because those guidelines are going to be coming out very soon.

When they do, I will make that another update to the Q&A here and make sure that you have all of that bonus information available.  Basically, you have to pay currently a minimum wage of $455 a week or they cannot be exempt.  Now you are probably sitting there thinking you just said they were exempt from minimum wage.  I did. They are exempt from being paid minimum wage for every hour they work, however, if you pay someone $455 a week or more and they match the rest of the duties under these 6 different types of testing that you can do for an exempt individual position, then they can be.  That may not always turn out to be minimum wage.  What if you have a worker that is putting in 70 hours a week and they are making $455?  See now we are talking about $6 an hour, a little over $6 an hour, that is not at all minimum wage.  That is why it is considered exempt from minimum wage, because you don t have to track their time.  You don t have to worry about how much you pay them.  Answering the question in its purest format, the answer would be no.

You really should not have all exempt workers in your organization, because I can just almost lay money down, that some of those workers are going to do things like filing, answering the phone, receptionist duties, clerical duties, data entry duties, maybe they are going to be accounts payable clerk that does a lot of entry of invoices of sending out bills and so forth.  Those are all considered nonexempt duties.  Those folks always have to make at least the minimum wage and they would also have to be overtime in most states if they work over 40 hours.  Some states like California has a policy or rule of law where if they have worked more than 8 hours in a day, they have to be paid overtime.  The majority of states in the union have the 40 hour a week law.  That is how that would have to be handled.  Let s make sure we are thinking about that.  We are making sure that people are always being handled the proper way.

HR Superstar

Let s move on into today s HR Superstar Section.  On every podcast I like to do a little what I saw go wrong or go right on television or in a movie this week.  My theory is HR is everywhere.   Anything that has anything to do with your workplace is definitely on the list of HR Superstar.  Today I m thinking really hard about Mad Men because as I am recording this today, Mad Men has just wrapped a few days ago.  The ending to Mad Men was just amazing and wonderful so I won t ruin it for you if you haven t watched it yet. You need to catch up on Mad Men and watch that ending because it was just awesome, awesome, and awesome.  The reason Mad Men made HR Superstar category today is because of all of the work place romances that take place, the workplace drinking and smoking and all of that that goes on on that television show.

Back in the 60s and 70s that was probably acceptable in a lot of organizations, especially advertising like Mad Men where they take place.  You probably remember watching Bewitched and you always remember Darren and his boss, Larry Tate, and they were always drinking.  They had a little bar set up over there at work.  There was a time when those things were acceptable, but no more today.  My HR Superstar is going out to Mad Men today, because they have the worst HR practices in the history of the world.  We loved the TV show and we are definitely going to miss it.  My whole family enjoys it and we are going to miss it.  HR Superstar trophy goes out to Mad Men today and Mr. Don Draper for being the biggest offender of any HR policy or procedure that you could ever come up with.  Way to go, Don Draper.

Well, that is going to wrap it up for us today on Small Business Spoonfuls.   Check in to us twice per week.  We are going to post our podcasts on Tuesdays and Thursday, so you can just count on that.  Send us your questions.  You can go to smalbusinessspoonfuls.com and we have a speak pipe out there.  Speak your question in and we will answer it on the air.  If we do, you will receive a t-shirt from us and we will be happy to send that out to you.  Leave some contact info so we can email you, give you a jingle, whatever, get back to you.  Thank you for participating in our podcast.   I am Lisa Smith and you guys have a great week and I will talk to you again in a couple of days.  I am out.

The post Episode 1: Can all of my employees be salaried exempt? appeared first on Be Audit Secure.

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