I remember a call I had with a friend once who is an executive at a mature small business. She had been using the HR product that comes with Paychex as her primary advisor for employment law and wage law issues.
She casually mentioned to me that all of her employees were salaried. As I coughed on my coffee, she asks, “is that wrong?”
Paychex told her that all employees can be salaried. Well, technically, it is possible to do that.
But you really shouldn’t.
Because what you mean is that you are not paying your employees overtime and that is definitely illegal. What Paychex means is that you can have salaried employees whom you also pay overtime — and while that’s possible, there is significant financial disadvantage to that.
Here’s a short explanation.
If you have salaried all your employees, regardless of whether you are paying them overtime, you need an immediate check to avoid a labor audit or class action lawsuit.
Can all my employees be salaried?
Sometimes business owners ask us: Can all my employees be salaried?
Actually, yes, but paying them a salary doesn’t mean that they are exempt from overtime laws. There is a difference between “salaried” and “exempt”. Plus, paying someone a salary makes deducting time off more complicated and sometimes illegal, so it’s not a good idea for most businesses to salary everyone. That aside, the question these business owners are actually intending to ask is whether you can have all your employees be exempt from over time and wage laws. Almost always, the answer is no. Exempt employees are the exception, not the rule. If you are exempting everyone… call an attorney! You have a serious problem and you should not try to fix it by yourself. Does your business need employment law help? Visit us at bellatrixlaw.com to apply for our Employer Protection services.
You can see the full video on salaried employees on YouTube.