If you are not an AIM member - Consider joining. AIM Members receive access to all our premium content online.
If you're an AIM member please login to your AIM account to view this post:
Employers often ask us how they can recognize or financially reward an exempt employee for going “above and beyond’ in a particular work situation. One lesser-known provision added to the Fair Labor Standards Act (FLSA), part of a 2004 overhaul of its regulations, gives employers the right to do exactly that.
Because companies are often nervous about any action that may jeopardize an exempt classification, they tend to tread carefully around paying an exempt employee extra money or providing that employee with any other extra benefit for a particular achievement. The fear is that it would be considered overtime pay if the Department of Labor were to examine the company’s practices.
However, the regulations changed 20 years ago, and it is absolutely permissible for an employer to recognize or financially reward an exempt employee for good work if the employer so chooses. The popular wisdom that this was impermissible was “drilled” into the heads of many HR folks over the years, generating fear that paying extra money would inadvertently reclassify the workers as nonexempt employees, exposing the company to potentially previously unpaid overtime and back wages for up to three years.
The source of this permission is a section (CFR §541.604) in the FLSA white-collar overtime regulations, called “Minimum guarantee plus extras.”
The section indicates that “an employer may provide an exempt employee with additional compensation without losing the exemption or violating the salary basis requirement if the employment arrangement also includes a guarantee of at least the minimum weekly-required amount paid on a salary basis.”
This means that if a person’s current weekly salary level is at least $684 per week and the position meets the job-duties requirements for classification as an exempt employee, the employer may pay the exempt employee in any of the following manners without losing the exemption:
The regulation also provides that an employer may reward the employee with paid time off. If you elect to compensate the employee with paid time off, be sure to track the time and to note that this time is apart from any other vacation or paid time off that you provide the employee.
Members with questions about FLSA classification issues or other human-resource and compliance issues may contact the AIM Helpline at 1-800-470-6277.
