How to Tell Your Salaried Employees They are Now Hourly

Some of your salaried employees are about to become hourly employees, and there’s nothing you can do to stop it. Starting on December 1, 2016, the minimum salary needed to qualify for a salary exemption will jump from $455 a week ($23,660 per year) to $913 per week ($47,476 per year). If you have employees who are currently exempt from overtime who earn less than $47,476 per year, you’ll have to change the way they are paid.

How should you tell your employees? Some of them won’t take it very well. You should have managers sit down, one on one, to deliver the news. But you’ll also want to follow up with written communication. Here is a sample letter to get you started. You will need to modify it for your specific situation. Please pay attention to local laws as well.

To read the sample letter click here: How to tell your salaried employees they are now hourly

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14 thoughts on “How to Tell Your Salaried Employees They are Now Hourly

  1. What a gift to employees! Now they will actually get paid for the hours they are working! Sure, may be “bad” for the employer. Best thing for employees, who have been mercilessly taken advantage of in the past. About time for this law. I bet employers will just try to skirt around it by having contract 1099 employees who are limited to one employer and are directed. Against the law! Why would think employees would NOT want to go to hourly? HR people are supposed to be respectful of human resources – not necessarily the guardians of the employer’s bottom line.

    1. I disagree. I worked for several years as an Exempt employee before our jobs were re-classified as Non-Exempt. Prior to the reclassification, we were allowed to work as many hours as necessary in order to get the job done, and the workload was such that it could not be adequately handled within a 40-hour workweek. Following the reclassification, we had the same amount of work, but were expected to complete it within 40 hours per week, as management was unwilling to approve overtime, with rare exceptions. When we were Exempt, we were treated as trusted professionals. Once we became Non-Exempt, we were treated like slackers whose time and attendance had to be ridiculously monitored and who obviously had something wrong with us is we required extra time to complete an assignment.

      1. So…in other words the company was very happy when you were working for free, and you did not realize this was a problem. If you are going to work for a low wage at least don’t work for free on top of that because it devalues your work and the work of your coworkers.

    2. I think the commonest response is to keep things the same by figuring an hourly rate that, when added to the usual amount of OT at time and a half, equals the previous salary.

  2. Please stick to those things you know something about. FLSA is clearly not one of them. The article, as well as the suggested letter is full of inaccuracies and confusing statements. So many that I don’t have enough space here to comment on them all.
    Just a few:
    Salaried and hourly are terms that have no standing under FLSA.. There are salaried non-exempt that are actually paid hourly and received overtime payments.
    Because you are non-exempt doesn’t require you to punch a time clock.
    Referring to week is very confusing. It is payroll week and the employer may establish this period, not necessarily the same as the calendar week.

    1. Actually, I am an expert on FLSA. You’re right that there can be salaried non-exempt, employees, but I’m writing to an audience of business owners who generally use salaried/hourly as substitutes for exempt/non-exempt. Regardless of whether a non-exempt person is salaried or not, all hours must be tracked, even if the person works less than 40.

      If you don’t track all hours, and an employee later complains that she didn’t receive proper overtime pay, you have no records to back up your claim. Good luck in court.

      There are other solutions than those outlined in the letter, of course, as I can’t address everything in one letter.

  3. Any advice on messaging to exempt employees who are getting a raise for the sole purpose of keeping them exempt?

  4. This has been a struggle for our business, as I’m sure it is for all small businesses and their workers who wear many hats. I did receive a notice from the state though, that this change was pushed to March 2017 for effectiveness. Is this correct?

    1. I have never heard that. There are a bunch of lawsuits pending, so things may change, but I’d count on December 1. If there is an official change, I’ll definitely write about it.

  5. I think any decent companies should not have waited until now to bring this up with their employees. They’ve known for a long time this was coming and had plenty of time to plan. A paper with FAQs is good but there should be a face-to-face meeting explaining it.

  6. I have always HATED “hourly employment”.

    I am not selling my time, I am selling my skills.

    I want the flexibility to be able to crush a task/contract, then DECIDE if I want to take a breather or pounce on the next bit of meat.

    “Hourly” Status simply doesn’t care if I am a top performer. In fact, it DISincentives employee performance, and INCENTIVISES inability and sloth by allowing poor performers to get OT by simply not doing their job.

    If I contract for a particular compensation, *that is entirely on me*. If I don’t like where that compensation is, I can renegotiate, or leave.

    But this stupid “hourly pay for hourly slack” “standard” drives me nuts.

  7. I was a salaried employee but when this came down my company chose to make me hourly I have been with the company for over 20 years and most have been exempt. I make well above the cutoff for FLSA. Was I just demoted and not told?

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