Finance News & Insights

New OT regs: 2-step strategy to convert salaried workers to hourly

To comply with the new OT regs, you may be considering converting salaried staffers to hourly employees.  

The big question: Is there a simple formula that, when OT hours are factored in, will allow them to pay employees the same amount as they were getting before the classification switch?

Employment attorney Bill Pokorny, writing on the Wage and Hour Insights blog, offers a painless two-step strategy to do just that.

Even if you’ve already made changes in response to the new regs, it’s a good idea to check your efforts against this process.

Overtime estimation

Estimating employees’ weekly overtime is the trickiest part of the conversion process, according to Pokorny – and for good reason. Any accurate projection of compensation for an employee who is entitled to overtime pay has to include an accurate estimate of how many overtime hours an employee is likely to work.

After all, non-exempt employees have to be paid for all hours worked (including after hours, issues that come up on breaks, etc.) and exempt employees don’t always follow a normal 40-hour schedule.

To get an accurate picture:

  • Talk to workers’ supervisors about when staffers would generally come in, if they respond to emails or calls after hours or whether they stay after the end of the workday.
  • Review records of company network access and keycard swipe logs to see when staffers are most likely there and working.
  • Begin requiring employees to record their hours before the conversion or get manager to keep tabs on staffers’ hours and habits. Use this info to put together a record of work hours.

Hourly wage calculation

After you have a pretty good picture of how many hours an employee works on regular basis, it’s just a matter of plugging that number into a simple formula, which is:

Hourly Rate = Salary/(40 + (overtime hours X 1.5))

If there’s no OT, it’s as simple as dividing the employee’s salary by the number of hours worked.

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