Companies that underestimate the importance of managing wages and salaries risk high turnover and low employee morale, productivity and retention. There also is a potential liability for claims arising from allegations of unfair employment practices and discriminatory pay practices. Managing wages and salaries requires knowledge of federal and state laws concerning employee classification as well as attention to compensation and payroll practices.
Study the difference between exempt and non-exempt classification. The Fair Labor Standards Act codifies overtime regulations for exempt and non-exempt workers. Employees classified as exempt are not entitled to overtime pay; they are exempt from FLSA rules on paying time and a half for working more than 40 hours in one week. Non-exempt employees are entitled to overtime pay whenever they work more than 40 hours in a work week.
Use the proper terms to distinguish between wages and salaries. It's perfectly acceptable to use the terms interchangeably; however, in some work environments, the terms "wages" and "salaries" refer to two different forms of employee compensation. The term "wages" typically refers to hourly compensation for non-exempt employees. The term "salaries" refers to weekly, bi-weekly, monthly or annual compensation paid mainly to exempt employees.
Obtain job descriptions, titles and employee records to ensure proper classification of exempt and non-exempt workers. Review employee information for classification in three primary areas: administrative, professional and executive. There are also exemption tests for employees in computer-related jobs, creative and outside sales positions.
Review your compensation practices and policies. Audit starting wages and salaries, criteria your organization uses for increases and circumstances that warrant wage and salary adjustments. Compensation practices and policies also may include processing deductions, garnishments and employee contributions to group health benefits, savings accounts and stock purchase plans. Wages and salaries refer solely to the amounts you pay employees in exchange for work they perform.
Review your overall wage and salary structure for fair and competitive pay practices. Employees in similar job groups and occupations and employees performing comparable work are entitled to be paid wages and salaries congruent with their skills and qualifications. Fair pay means your organization achieves internal equity where compensation is concerned; competitive pay refers to external equity, meaning your compensation practices are based on profitability, industry practices and employment trends.
All salaried employees are not exempt from overtime pay rules. The FLSA contains specific rules on certain non-exempt, salaried employees.
Certain state laws mandate overtime pay for employees who work more than eight or 10 hours each day.
The U.S. Department of Labor enforces the FLSA and provides technical guidance to employers on classification issues. Access the DOL website for information on how to contact your local office should you need assistance in determining exempt and non-exempt status.
Compensation and payroll specialists should become familiar with the Lilly Ledbetter Fair Pay Act of 2009, which significantly affected rules governing compensation practices as they relate to employees protected by Title VII of the Civil Rights Act of 1964 and the Age Discrimination in Employment Act of 1967.
Mayhew, Ruth. "How to Manage Wages & Salaries." Small Business - Chron.com, http://smallbusiness.chron.com/manage-wages-salaries-11180.html. Accessed 20 April 2019.