Question: May I provide an exempt employee with additional compensation for working longer hours on a time-sensitive project without losing the exemption?
Answer: Yes. If you have a position that is classified as exempt—meaning the position is exempt from minimum wage requirements and overtime pay as determined by the Fair Labor Standards Act (FLSA)— that does not prevent you from providing that employee with additional compensation to express appreciation when the employee works more hours than expected. Unlike non-exempt employees who are compensated for the time they work, exempt employees are paid on a salaried basis for the work they do.
You may provide the employee with additional compensation if the employment arrangement includes a guarantee of at least the minimum weekly-required amount paid on a salary basis. For example, suppose you have an employee working in a position classified as exempt. The current salary level for this employee is $2,000 each week, paid on a salaried basis. As long as the employee continues to receive the salaried pay of $2,000 each week, you may provide additional compensation for hours worked beyond the normal workweek. Additional compensation may be paid on any basis including flat sum, bonus payment, straight-time hourly, time-and-one-half, additional paid time off, or other methods used to reward employees for extraordinary work.
Paying exempt employees additional compensation—such as bonuses or hourly incentives—can be perfectly legal, but only when handled correctly under FLSA guidelines. Missteps can quickly lead to compliance violations and financial penalties.
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Written by
Jo McClure, CPP, is the Director of Payroll Administration at Axcet HR Solutions, where she has been a pivotal leader for over 20 years. With more than two decades of experience in payroll outsourcing and professional employer organizations (PEOs), Jo specializes in helping small to mid-sized businesses navigate payroll administration, employee benefits, and compliance.
Her strategic leadership at Axcet focuses on implementing best practices in payroll management, compliance auditing, and risk mitigation. Jo obtained her Certified Payroll Professional (CPP) designation in 2006 and has held numerous leadership roles in the Greater Kansas City Chapter of the American Payroll Association, including President, Vice President, and Chapter Coordinator. A frequent speaker at the Midwest Regional Payroll Conference, she has also contributed articles to publications such as Thinking Bigger Business and Kansas City Small Business Monthly.
Jo's specialties include payroll implementation, compliance auditing, and crafting best-practice payroll solutions that ensure businesses stay compliant while optimizing their processes.
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