--- title: Should You Switch Employees from Salary to Hourly Pay? description: Wondering if you should switch an employee from salary to hourly pay? Learn when it's legal, how to do it right and how to stay FLSA compliant. image: https://blog.axcethr.com/hubfs/feb%2024%20blog%20image%202.png --- - [Client Portal](https://www.axcethr.com/client-services/) - [Employee Login](https://www.axcethr.com/client-services/) [![AxcetHR Solutions Blog](https://blog.axcethr.com/hubfs/AxcetHR2021%20Blog/axcethr_logo_white%20(1).png)](https://www.axcethr.com/) - [About Us](https://www.axcethr.com/about-us/) - [Corporate Philantropy](https://www.axcethr.com/about-us/corporate-philanthropy/) - [Meet the Team](https://www.axcethr.com/about-us/meet-the-team/) - [Values and Culture](https://www.axcethr.com/about-us/values-and-culture/) - [Kansas PEO](https://www.axcethr.com/about-us/kansas-peo/) - [Missouri PEO](https://www.axcethr.com/about-us/missouri-peo/) - [Careers](https://axcethrsolutions.prismhr-hire.com/) - [Why Axcet](https://www.axcethr.com/why-axcet/) - [Why Choose Axcet?](https://www.axcethr.com/why-axcet/) - [About PEOs](https://www.axcethr.com/why-axcet/about-peos/) - [PEO Cost](https://www.axcethr.com/peo-cost/) - [Switching PEOs](https://www.axcethr.com/switching-peos/) - [Certified PEO](https://www.axcethr.com/why-axcet/certified-peo/) - [HR Outsource Options](https://www.axcethr.com/why-axcet/outsourcing-options/) - [Client Reviews](https://www.axcethr.com/why-axcet/client-reviews/) - [PEO Services](https://www.axcethr.com/services/) - [Human Resources](https://www.axcethr.com/services/human-resources/) - [Employee Benefits](https://www.axcethr.com/services/employee-benefits/) - [Payroll Services](https://www.axcethr.com/services/payroll-and-tax-administration-services/) - [Workers' Comp. and Employee Safety Risk Management](https://www.axcethr.com/services/workers-comp-and-employee-safety-risk-management/) - [Expertise](https://www.axcethr.com/expertise/) - [PEO Expertise You Can Trust](https://www.axcethr.com/expertise/) - [Resource Library](https://www.axcethr.com/expertise/resource-library/) - [Subscribe to the Blog](https://www.axcethr.com/subscribe-to-the-latest-resources/) - [Blog](https://blog.axcethr.com) - [Schedule a Consultation](https://www.axcethr.com/schedule-consultation/) - [Why Axcet](https://www.axcethr.com/why-axcet/) - [Client Reviews](https://www.axcethr.com/why-axcet/client-reviews/) - [Why Choose Axcet?](https://www.axcethr.com/why-axcet/) - [About PEOs](https://www.axcethr.com/why-axcet/about-peos/) - [Certified PEO](https://www.axcethr.com/why-axcet/certified-peo/) - [Options to Outsource Human Resources](https://www.axcethr.com/why-axcet/outsourcing-options/) - [Services](https://www.axcethr.com/services/) - [Complete List of Services](https://www.axcethr.com/services/) - [Human Resources](https://www.axcethr.com/services/human-resources/) - [Employee Benefits](https://www.axcethr.com/services/employee-benefits/) - [Risk Management](https://www.axcethr.com/services/risk-management/) - [Payroll Administration](https://www.axcethr.com/services/payroll-and-tax-administration-services/) - [Expertise](https://www.axcethr.com/expertise/) - [Expertise You Can Trust](https://www.axcethr.com/expertise/) - [Resource Library](https://www.axcethr.com/expertise/resource-library/) - [Blog](https://blog.axcethr.com/) - [Subscribe to the Blog](https://www.axcethr.com/subscribe-to-the-latest-resources/) - [About Us](https://www.axcethr.com/about-us/) - [Community Involvement](https://www.axcethr.com/about-us/community-involvement/) - [Meet the Team](https://www.axcethr.com/about-us/meet-the-team/) - [What We Stand For](https://www.axcethr.com/about-us/what-we-stand-for/) - [Careers](https://axcethrsolutions.prismhr-hire.com/) - [Client Portal](https://www.axcethr.com/client-services/) - [Employee Login](https://www.axcethr.com/client-services/) [![fuel-blog-logo](https://blog.axcethr.com/hs-fs/hubfs/fuel-blog-logo.png?width=310&height=97&name=fuel-blog-logo.png)](https://blog.axcethr.com) Filter Blog by Topic - [Human Resources](https://blog.axcethr.com/topic/human-resources) - [Payroll Administration](https://blog.axcethr.com/topic/payroll-administration) - [Employee Safety & Risk Management](https://blog.axcethr.com/topic/employee-safety-risk-management) - [Employee Benefits](https://blog.axcethr.com/topic/employee-benefits) - [All about COVID-19 in the Workplace](https://blog.axcethr.com/topic/covid19) - [Kansas & Missouri HR News](https://blog.axcethr.com/topic/kansas-and-missouri-hr-news) - [Kansas City Interest News](https://blog.axcethr.com/topic/kansas-city-interest-news) - [PEO/HRO](https://blog.axcethr.com/topic/peo) - Choose Topic: - [Human Resources](https://blog.axcethr.com/topic/human-resources) - Payroll Administrations - [Employee Safety & Risk Management](https://blog.axcethr.com/topic/employee-safety-risk-management) - [Employee Benefits](https://blog.axcethr.com/topic/employee-benefits) - [PEO](https://blog.axcethr.com/topic/peo) Play Audio Should You Switch Employees from Salary to Hourly Pay? 5:55 # When to Consider Switching Employees from Salary to Hourly Pay By [Mariah Collins, SHRM-SCP](https://blog.axcethr.com/author/mariah-collins) on [Jun 23, 2025](https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay) 6 min read [8 Comments](https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay#comments-listing) Share this: - - - - [whatsapp://send?text=https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay](whatsapp://send?text=https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay) - [mailto:?subject=Should%20You%20Switch%20Employees%20from%20Salary%20to%20Hourly%20Pay?&body=https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay](mailto:?subject=Should%20You%20Switch%20Employees%20from%20Salary%20to%20Hourly%20Pay?&body=https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay) ![feb 24 blog image 2](https://blog.axcethr.com/hs-fs/hubfs/feb%2024%20blog%20image%202.png?quality=low&width=1000&name=feb%2024%20blog%20image%202.png) In the ever-evolving world of business, one persistent question continues to surface for employers: **When—and how—should you switch an employee from salary to hourly pay?** The answer often hinges on federal wage regulations, specifically the [Fair Labor Standards Act (FLSA)](https://www.dol.gov/agencies/whd/fact-sheets/23-flsa-overtime-pay), which governs minimum wage, overtime, and exempt versus non-exempt status. Recent legal developments have complicated the landscape, but the core issue remains the same: ensuring compliance while keeping your compensation strategy cost-effective and fair. Whether you're a seasoned business owner or just starting out, understanding how and when to reclassify employees is pivotal. RELATED: [FLSA Basics - A Toolkit for Employers >>](https://blog.axcethr.com/flsa-basics-a-toolkit-for-employers) ## Understanding the Current FLSA Salary Threshold In 2024, the U.S. Department of Labor proposed significant increases to the minimum salary required for exempt (salaried, overtime-ineligible) status. However, a federal court blocked the rule, and none of the proposed increases ever took effect. As of **June 2025**, the **federal salary threshold remains**: - **$684 per week**, or - **$35,568 per year** Any employee earning less than this amount—regardless of job title—**must be classified as non-exempt** and is entitled to overtime pay under federal law. **Note:** Some states, such as California, Colorado and Washington, enforce higher salary thresholds. In those states, you must follow the stricter state rule. [![New call-to-action](https://no-cache.hubspot.com/cta/default/2652187/e12afe59-fda9-4567-85a9-3f8430328631.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/e12afe59-fda9-4567-85a9-3f8430328631) ## Why Employers Reclassify from Salary to Hourly Pay **Hourly workers must be paid 1.5 times their base rate** for every hour worked beyond 40 in a workweek. By contrast, salaried (exempt) employees do not receive overtime pay—regardless of how many extra hours they put in. Still, your company might come out ahead by reclassifying certain employees from salary to hourly pay. Here's why: ### **Cost Efficiency** For employees whose salaries fall below the federal (or state) threshold, paying overtime may cost less than increasing base salaries to maintain exempt status. ### **Legal Risk Mitigation** Companies with large numbers of exempt employees may draw attention from the Department of Labor, especially if those employees' job duties don't clearly meet exemption criteria. ### **Flexibility** Hourly status allows employers to better match compensation with actual hours worked, particularly in roles with fluctuating demand. [![FLSA white collar exemptions](https://no-cache.hubspot.com/cta/default/2652187/8411904f-e6f3-4574-9171-e9f4c79ebb0e.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/8411904f-e6f3-4574-9171-e9f4c79ebb0e) ## Laws on Changing from Salary to Hourly Pay Yes, **it’s legal to reclassify employees from salaried to hourly**—but it must be done carefully to remain compliant with FLSA and avoid employee confusion or potential legal claims. Here’s what employers should keep in mind: ### **Document Everything** Employers must be able to demonstrate when and why the reclassification occurred. Keep detailed records to share with the DOL’s Wage and Hour Division if needed. ### **Avoid Flip-Flopping** HR professionals recommend changing an employee’s classification no more than once, if possible. Switching back and forth between exempt and non-exempt may be viewed as an attempt to sidestep compliance obligations. ### **Review Job Duties** Before making the change, revisit the FLSA **duties test** to ensure the role fits a non-exempt classification. Typically, employees who do not manage others or make key business decisions are better suited to hourly roles. ### **Revise Job Descriptions if Needed** For at-will employees, it's acceptable to adjust duties to align with the new classification. Start by reviewing the [FLSA duties test](https://blog.axcethr.com/exempt-v.-non-exempt-whats-the-difference) to ensure the reclassification aligns with the job description. Typically, you can consider anyone who does not directly impact the company’s management as an hourly, non-exempt employee. Consult an employment attorney about any employee whose status is questionable. You also may need to revise the employee’s job description to fit a non-exempt status, which is acceptable for at-will employees. RELATED: [Six Dos and Don’ts of Paying Overtime >>](https://blog.axcethr.com/6-dos-and-donts-of-paying-overtime) ## **How to Calculate Employee Pay from Salary to Hourly** If you plan to retain an employee’s total compensation, converting their annual salary to an hourly rate is straightforward. **Step 1**: Divide the annual salary by **52 weeks** (the number of weeks in a year) to determine the **weekly pay**. **Step 2**: Divide the weekly pay by the number of **hours in a standard workweek** (typically 40) to find the **hourly rate**. **Example**: $40,000 annual salary ÷ 52 weeks = **$769.23/week** $769.23 ÷ 40 hours = **$19.23/hour** Sharing this simple math with employees can ease concerns. When they see their hourly pay equals the same total compensation, they’re less likely to feel that the reclassification is a pay cut. [![New call-to-action](https://no-cache.hubspot.com/cta/default/2652187/43b7e131-f21e-4698-92fe-48b852954d2c.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/43b7e131-f21e-4698-92fe-48b852954d2c) ## Don’t Forget Time Tracking and Overtime Policies Reclassified hourly employees must now **track their time** accurately. This includes time spent checking email after hours or finishing work on weekends—tasks salaried employees often perform without compensation. To ensure compliance and manage labor costs: - Review your overtime and timekeeping policies. - Train both employees and managers on accurate time tracking. - Consider flex-time options to avoid unnecessary overtime (e.g., if someone stays late on a Tuesday, they might start later on Wednesday). - Create guardrails for remote work and after-hours availability. **RELATED:** [How to Accurately Measure Time and Attendance >>](https://blog.axcethr.com/flsa-overtime-rules-how-to-accurately-measure-time-and-attendance) ## Tips for a Smooth Transition from Salary to Hourly Reclassification isn’t just a legal shift—it’s a cultural one. Help employees understand the change and feel supported by taking these steps: - **Communicate clearly**: Explain the rationale behind the reclassification and emphasize that it's not a demotion. - **Reinforce fairness**: Clarify how the new pay structure works and highlight that they’re now compensated for all time worked. - **Provide training**: Ensure both employees and managers understand timekeeping tools and wage/hour rules. - **Align priorities**: Work with employees to rebalance workloads if necessary to stay within 40 hours per week. ## FAQ: Salary to Hourly Pay **Q: Can you convert a salaried employee to hourly pay?** **A:** Yes. As long as the employee’s compensation and duties no longer meet the FLSA’s exempt requirements, you may reclassify them to hourly. Just be sure to document the reason for the change. **Q: Do you have to give a raise when reclassifying an employee to hourly?** **A:** No—but you should ensure the new hourly wage aligns with minimum wage and accurately reflects the employee’s prior compensation if you want to avoid pay dissatisfaction. **Q: Can exempt employees ever be paid hourly?** **A:** Technically, yes—but it’s complex. To remain exempt, the employee must still meet the duties test and be paid on a salary basis. Paying hourly often nullifies that status. It’s safest to treat hourly workers as non-exempt. **Q: What’s the current federal salary threshold for exemption?** **A:** As of June 2025, it’s **$684/week or $35,568/year**. Higher thresholds may apply in certain states. **Q: Can I switch someone back to salary later?** **A:** Yes, employers can reclassify an employee from hourly back to salaried (exempt) status—**as long as the employee meets the FLSA's salary and duties tests** at the time of the change. However, doing so repeatedly or without a clear business rationale can raise red flags with the Department of Labor. If the changes appear to be a way to avoid paying overtime or complying with wage laws, they may be scrutinized during an audit or investigation. Best practice is to make classification changes only when there’s a legitimate, documented reason—such as a substantial change in job duties or compensation. ## **[![Stress-Free Payroll Processing](https://no-cache.hubspot.com/cta/default/2652187/interactive-189805175855.png)](https://blog.axcethr.com/hs/cta/wi/redirect?encryptedPayload=AVxigLKhvboCEQ4lUSEGKS0VL4iBJxPMojpBwqmhzkO8Kp9dKWg5WrHcrQKQCjMRgMdzOzt%2FeIi9cjbtEaYMCcbE64gv2pllAwzCZ%2Ft50MrLEpNL7jSl3PIGQCo1Xi4smv%2FRfnu7yqNM2G3ttMOuuff2%2F4dFKh6%2FfBGSTRhK4Q4ydOvyYp9U35VDt2lBE8cU%2Bj8p1LV8Y4%2BJgVY1gfPysoGoKLGTGPNwI2SdRnLQyi4%2FUqQlm%2BWw5FU5whLFS%2FtO2N1wOhgxSVQQIxEWOrZBPnHeBVJnWhuHrROAQhG2PB4dFVsPlwAObkfifH88&webInteractiveContentId=189805175855&portalId=2652187)** ## Use Axcet HR Solutions as Your Guide Changing an employee’s classification from salary to hourly pay isn’t just a payroll decision—it’s a compliance risk, a cultural shift and a communication challenge. At Axcet HR Solutions, we help small and mid-sized businesses across the U.S. navigate FLSA rules, payroll transitions and employee reclassifications with confidence. As a [certified professional employer organization (CPEO)](https://www.axcethr.com/why-axcet/certified-peo/) headquartered in Kansas City, our team of certified [HR](https://www.axcethr.com/services/human-resources/), [payroll](https://www.axcethr.com/services/payroll-and-tax-administration-services/) and compliance experts is here to ensure your transition is seamless, legal and clear. --- **Considering a classification change?** Talk with our team to get HR guidance that protects your business—and supports your people. 👉[Schedule a consultation >>](https://www.axcethr.com/schedule-consultation/) [![PEO Payroll Services](https://no-cache.hubspot.com/cta/default/2652187/e1855a1e-6f81-48cb-b4a1-2c8a96b0f7c4.png)](https://cta-redirect.hubspot.com/cta/redirect/2652187/e1855a1e-6f81-48cb-b4a1-2c8a96b0f7c4) [![Mariah Collins, SHRM-SCP](https://blog.axcethr.com/hs-fs/hubfs/Mariah_DSC6768-Edit.jpg?width=80&height=80&name=Mariah_DSC6768-Edit.jpg)](https://blog.axcethr.com/author/mariah-collins) Written by #### [Mariah Collins, SHRM-SCP](https://blog.axcethr.com/author/mariah-collins) Mariah Collins, SHRM-SCP, is a Human Resources Consultant at Axcet HR Solutions, specializing in people management, process improvement, and project management. With a strong background in payroll, benefits, and employee relations, she brings over four years of experience in providing HR solutions to small businesses. Mariah holds a Bachelor of Business Administration in Human Resources from Emporia State University and is known for her expertise in helping businesses streamline HR processes while ensuring compliance. Her contributions to the Axcet blog reflect her deep understanding of HR challenges and her commitment to supporting small business owners. Read more [View all posts →](https://blog.axcethr.com/author/mariah-collins) ### Get HR Updates ### Table of Contents ### Related Resources - [services Human Resources](https://www.axcethr.com/services/human-resources/) #### [Empowering Your Team: Employer Guide to Short Term Disability & FMLA ![What is the Difference Between Short-Term Disability & FMLA Leave?](https://blog.axcethr.com/hubfs/short-term-disability-and-FMLA-_1200-%C3%97-628-px_%20(1).webp)](https://blog.axcethr.com/what-is-the-difference-between-short-term-disability-fmla-leave) #### [![Director of HR for Axcet HR Solutions discussing 2025 employee benefits trends](https://blog.axcethr.com/hubfs/employee-benefits-trends-_1200-x-628-px_%20(1).webp) Beyond Insurance: 2025 Employee Benefits Trends That Drive Retention](https://blog.axcethr.com/employee-benefits-trends) ## Let us know what you think... ![AxcetHR Blog](https://blog.axcethr.com/hubfs/AxcetHR2021%20Blog/axcethr_logo_white%20(1).png) - [Why Axcet](https://www.axcethr.com/why-axcet/) - [What We Stand For](https://www.axcethr.com/about-us/what-we-stand-for/) - [Expertise](https://www.axcethr.com/expertise/) - [Employee Benefits](https://www.axcethr.com/services/employee-benefits/) - [Human Resources](https://www.axcethr.com/services/human-resources/) - [Payroll Services](https://www.axcethr.com/services/payroll-and-tax-administration-services/) - [Risk Management](https://www.axcethr.com/services/workers-comp-and-employee-safety-risk-management/) - [Meet the Team](https://www.axcethr.com/about-us/meet-the-team/) - [Subscribe to Latest Resources](https://www.axcethr.com/subscribe-to-the-latest-resources/) - [Resource Library](https://www.axcethr.com/expertise/resource-library/) - [\[ Client Portal \]](https://www.axcethr.com/client-services/) - - - - - Search for: Copyright © 2023 Axcet HR Solutions – Kansas City's PEO Since 1988 | [Privacy Policy](https://www.axcethr.com/privacy-policy/) | [Terms and Conditions](https://www.axcethr.com/terms-conditions/) | [**Join our Team – Careers »**](https://axcethrsolutions.prismhr-hire.com/) 10975 Grandview Drive Suite 200, Corporate Woods Building 27, Overland Park, KS 66210 | Call us: 913-383-2999 *The IRS does not endorse any particular For more information on [certified professional employer organizations](https://www.axcethr.com/why-axcet/certified-peo/), go to [www.irs.gov](https://www.irs.gov).* Remove cookies ![](https://dc.ads.linkedin.com/collect/?pid=43031&fmt=gif) ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Mariah Collins, SHRM-SCP", "url" : "https://blog.axcethr.com/author/mariah-collins" }, "dateModified" : "2025-07-25T16:58:38.925Z", "datePublished" : "2025-06-23T11:00:00.000Z", "headline" : "Should You Switch Employees from Salary to Hourly Pay?", "image" : [ "https://blog.axcethr.com/hubfs/feb%2024%20blog%20image%202.png" ], "mainEntityOfPage" : { "@id" : "https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://blog.axcethr.com/hubfs/_logo_axcethr_primary.png" }, "name" : "Axcet HR Solutions" } } ``` ```json { "@context" : "https://schema.org", "@id" : "https://www.axcethr.com/#organization", "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "US", "addressLocality" : "Kansas City", "addressRegion" : "MO" }, "aggregateRating" : { "@type" : "AggregateRating", "bestRating" : "5", "ratingValue" : "5", "reviewCount" : "100" }, "areaServed" : { "@type" : "Country", "name" : "United States" }, "award" : [ "IRS Certified Professional Employer Organization (CPEO)", "Award-Winning HR Solutions Provider", "SHRM Certified HR Professionals", "HRCI Certified HR Professionals" ], "contactPoint" : { "@type" : "ContactPoint", "areaServed" : "US", "availableLanguage" : "English", "contactType" : "Customer Service" }, "description" : "Award-winning Professional Employer Organization (PEO) providing comprehensive HR solutions, payroll services, employee benefits, and risk management to small and mid-sized businesses. Founded in Kansas City in 1988 with 35+ years of expertise.", "foundingDate" : "1988", "foundingLocation" : { "@type" : "Place", "address" : { "@type" : "PostalAddress", "addressCountry" : "US", "addressLocality" : "Kansas City", "addressRegion" : "MO" } }, "hasOfferCatalog" : { "@type" : "OfferCatalog", "itemListElement" : [ { "@type" : "Offer", "itemOffered" : { "@type" : "Service", "description" : "Comprehensive HR management services including recruitment, retention, performance management, and company culture development", "name" : "Human Resources Management" } }, { "@type" : "Offer", "itemOffered" : { "@type" : "Service", "description" : "Accurate payroll processing and payroll tax filing with dedicated payroll consultants", "name" : "Payroll Processing" } }, { "@type" : "Offer", "itemOffered" : { "@type" : "Service", "description" : "Group employee benefits management including health insurance evaluation, selection, and administration", "name" : "Employee Benefits Administration" } }, { "@type" : "Offer", "itemOffered" : { "@type" : "Service", "description" : "Workplace safety compliance and risk management solutions", "name" : "Risk Management" } }, { "@type" : "Offer", "itemOffered" : { "@type" : "Service", "description" : "Employment law compliance, regulatory reporting, and guidance from employment law attorneys", "name" : "HR Compliance & Legal Support" } } ], "name" : "HR Solutions Services" }, "keywords" : "PEO, Professional Employer Organization, HR Solutions, Human Resources Outsourcing, Payroll Services, Employee Benefits, Kansas City PEO, Small Business HR, Mid-Sized Business HR, HR Consulting, IRS Certified PEO, CPEO", "knowsAbout" : [ "Human Resources Management", "Professional Employer Organization", "PEO Services", "Payroll Processing", "Employee Benefits Administration", "Risk Management", "HR Compliance", "Health Plan Management", "Talent Recruitment", "Performance Management", "Workplace Safety", "Employment Law Compliance" ], "legalName" : "Axcet HR Solutions", "logo" : { "@type" : "ImageObject", "url" : "https://www.axcethr.com/wp-content/uploads/axcet-logo.png" }, "memberOf" : { "@type" : "Organization", "name" : "IRS Certified Professional Employer Organizations" }, "name" : "Axcet HR Solutions", "numberOfEmployees" : { "@type" : "QuantitativeValue", "value" : "50-200" }, "sameAs" : [ "https://blog.axcethr.com" ], "slogan" : "HR Support That Drives Success", "url" : "https://www.axcethr.com" } ``` ```json { "@context" : "https://schema.org", "@id" : "https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay#article", "@type" : "BlogPosting", "alternativeHeadline" : "In the ever-evolving world of business, one persistent false", "articleBody" : "In the ever-evolving world of business, one persistent question continues to surface for employers: When—and how—should you switch an employee from salary to hourly pay? The answer often hinges on federal wage regulations, specifically the Fair Labor Standards Act (FLSA), which governs minimum wage, overtime, and exempt versus non-exempt status. Recent legal developments have complicated the landscape, but the core issue remains the same: ensuring compliance while keeping your compensation strategy cost-effective and fair. Whether you're a seasoned business owner or just starting out, understanding how and when to reclassify employees is pivotal. RELATED: FLSA Basics - A Toolkit for Employers >> Understanding the Current FLSA Salary Threshold In 2024, the U.S. Department of Labor proposed significant increases to the minimum salary required for exempt (salaried, overtime-ineligible) status. However, a federal court blocked the rule, and none of the proposed increases ever took effect. As of June 2025, the federal salary threshold remains: $684 per week, or $35,568 per year Any employee earning less than this amount—regardless of job title—must be classified as non-exempt and is entitled to overtime pay under federal law. Note: Some states, such as California, Colorado and Washington, enforce higher salary thresholds. In those states, you must follow the stricter state rule. Why Employers Reclassify from Salary to Hourly Pay Hourly workers must be paid 1.5 times their base rate for every hour worked beyond 40 in a workweek. By contrast, salaried (exempt) employees do not receive overtime pay—regardless of how many extra hours they put in. Still, your company might come out ahead by reclassifying certain employees from salary to hourly pay. Here's why: Cost Efficiency For employees whose salaries fall below the federal (or state) threshold, paying overtime may cost less than increasing base salaries to maintain exempt status. Legal Risk Mitigation Companies with large numbers of exempt employees may draw attention from the Department of Labor, especially if those employees' job duties don't clearly meet exemption criteria. Flexibility Hourly status allows employers to better match compensation with actual hours worked, particularly in roles with fluctuating demand. Laws on Changing from Salary to Hourly Pay Yes, it’s legal to reclassify employees from salaried to hourly—but it must be done carefully to remain compliant with FLSA and avoid employee confusion or potential legal claims. Here’s what employers should keep in mind: Document Everything Employers must be able to demonstrate when and why the reclassification occurred. Keep detailed records to share with the DOL’s Wage and Hour Division if needed. Avoid Flip-Flopping HR professionals recommend changing an employee’s classification no more than once, if possible. Switching back and forth between exempt and non-exempt may be viewed as an attempt to sidestep compliance obligations. Review Job Duties Before making the change, revisit the FLSA duties test to ensure the role fits a non-exempt classification. Typically, employees who do not manage others or make key business decisions are better suited to hourly roles. Revise Job Descriptions if Needed For at-will employees, it's acceptable to adjust duties to align with the new classification. Start by reviewing the FLSA duties test to ensure the reclassification aligns with the job description. Typically, you can consider anyone who does not directly impact the company’s management as an hourly, non-exempt employee. Consult an employment attorney about any employee whose status is questionable. You also may need to revise the employee’s job description to fit a non-exempt status, which is acceptable for at-will employees. RELATED: Six Dos and Don’ts of Paying Overtime >> How to Calculate Employee Pay from Salary to Hourly If you plan to retain an employee’s total compensation, converting their annual salary to an hourly rate is straightforward. Step 1: Divide the annual salary by 52 weeks (the number of weeks in a year) to determine the weekly pay. Step 2: Divide the weekly pay by the number of hours in a standard workweek (typically 40) to find the hourly rate. Example: $40,000 annual salary ÷ 52 weeks = $769.23/week $769.23 ÷ 40 hours = $19.23/hour Sharing this simple math with employees can ease concerns. When they see their hourly pay equals the same total compensation, they’re less likely to feel that the reclassification is a pay cut. Don’t Forget Time Tracking and Overtime Policies Reclassified hourly employees must now track their time accurately. This includes time spent checking email after hours or finishing work on weekends—tasks salaried employees often perform without compensation. To ensure compliance and manage labor costs: Review your overtime and timekeeping policies. Train both employees and managers on accurate time tracking. Consider flex-time options to avoid unnecessary overtime (e.g., if someone stays late on a Tuesday, they might start later on Wednesday). Create guardrails for remote work and after-hours availability. RELATED: How to Accurately Measure Time and Attendance >> Tips for a Smooth Transition from Salary to Hourly Reclassification isn’t just a legal shift—it’s a cultural one. Help employees understand the change and feel supported by taking these steps: Communicate clearly: Explain the rationale behind the reclassification and emphasize that it's not a demotion. Reinforce fairness: Clarify how the new pay structure works and highlight that they’re now compensated for all time worked. Provide training: Ensure both employees and managers understand timekeeping tools and wage/hour rules. Align priorities: Work with employees to rebalance workloads if necessary to stay within 40 hours per week. FAQ: Salary to Hourly Pay Q: Can you convert a salaried employee to hourly pay? A: Yes. As long as the employee’s compensation and duties no longer meet the FLSA’s exempt requirements, you may reclassify them to hourly. Just be sure to document the reason for the change. Q: Do you have to give a raise when reclassifying an employee to hourly? A: No—but you should ensure the new hourly wage aligns with minimum wage and accurately reflects the employee’s prior compensation if you want to avoid pay dissatisfaction. Q: Can exempt employees ever be paid hourly? A: Technically, yes—but it’s complex. To remain exempt, the employee must still meet the duties test and be paid on a salary basis. Paying hourly often nullifies that status. It’s safest to treat hourly workers as non-exempt. Q: What’s the current federal salary threshold for exemption? A: As of June 2025, it’s $684/week or $35,568/year. Higher thresholds may apply in certain states. Q: Can I switch someone back to salary later? A: Yes, employers can reclassify an employee from hourly back to salaried (exempt) status—as long as the employee meets the FLSA's salary and duties tests at the time of the change. However, doing so repeatedly or without a clear business rationale can raise red flags with the Department of Labor. If the changes appear to be a way to avoid paying overtime or complying with wage laws, they may be scrutinized during an audit or investigation. Best practice is to make classification changes only when there’s a legitimate, documented reason—such as a substantial change in job duties or compensation. Use Axcet HR Solutions as Your Guide Changing an employee’s classification from salary to hourly pay isn’t just a payroll decision—it’s a compliance risk, a cultural shift and a communication challenge. At Axcet HR Solutions, we help small and mid-sized businesses across the U.S. navigate FLSA rules, payroll transitions and employee reclassifications with confidence. As a certified professional employer organization (CPEO) headquartered in Kansas City, our team of certified HR, payroll and compliance experts is here to ensure your transition is seamless, legal and clear. Considering a classification change? Talk with our team to get HR guidance that protects your business—and supports your people. 👉Schedule a consultation >>", "author" : { "@id" : "https://blog.axcethr.com/author/mariah-collins#author", "@type" : "Person", "name" : "Mariah Collins, SHRM-SCP", "url" : "https://blog.axcethr.com/author/mariah-collins" }, "dateCreated" : "2025-06-23", "dateModified" : "2025-07-25", "datePublished" : "2025-06-23", "description" : "In the ever-evolving world of business, one persistent question continues to surface for employers: When—and how—should you switch an employee from salary to hourly pay? The answer often hinges on federal wage regulations, specifically the Fair Labor Standards Act (FLSA), which governs minimum wage, overtime, and exempt versus non-exempt ...", "editor" : "Mariah Collins, SHRM-SCP", "genre" : "Human Resources and Employee Management", "headline" : "Should You Switch Employees from Salary to Hourly Pay?", "image" : "https://cdn2.hubspot.net/hubfs/2652187/feb%2024%20blog%20image%202.png", "keywords" : "Human Resources, Payroll Administration, DOL new overtime rule, Fair Labor Standards Act, new overtime rule, DOL overtime rule 2019, new overtime rules, DOL overtime rule 2020, flsa overtime, fair labor standards act overtime, salary overtime law, dol overtime rule, can you change an employee from salary to hourly, change from salary to hourly, going from salary to hourly, can an employer change you from salary to hourly, should i pay my employees hourly or salary, salary to hourly pay", "mainEntityOfPage" : { "@id" : "https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay", "@type" : "WebPage" }, "publisher" : { "@id" : "https://www.axcethr.com/#organization", "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://blog.axcethr.com/hs-fs/hubfs/axcethr_logo_white.png?width=225&name=axcethr_logo_white.png" }, "name" : "Axcet HR Solutions" }, "url" : "https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay", "wordCount" : "8195" } ``` ```json { "@context" : "https://schema.org", "@type" : "BreadcrumbList", "itemListElement" : [ { "@type" : "ListItem", "item" : "https://www.axcethr.com/", "name" : "Home", "position" : 1 }, { "@type" : "ListItem", "item" : "https://insights.axcethr.com/", "name" : "Insights", "position" : 2 }, { "@type" : "ListItem", "item" : "https://insights.axcethr.com/tag/human-resources", "name" : "Human Resources", "position" : 3 }, { "@type" : "ListItem", "item" : "https://blog.axcethr.com/when-hourly-met-salary-should-you-switch-salaried-exempt-employees-to-hourly-pay", "name" : "Should You Switch Employees from Salary to Hourly Pay?", "position" : 4 } ] } ``` ```json { "@context" : "https://schema.org", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Yes. As long as the employee’s compensation and duties no longer meet the FLSA’s exempt requirements, you may reclassify them to hourly. Just be sure to document the reason for the change." }, "name" : "Can you convert a salaried employee to hourly pay?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "No—but you should ensure the new hourly wage aligns with minimum wage and accurately reflects the employee’s prior compensation if you want to avoid pay dissatisfaction." }, "name" : "Do you have to give a raise when reclassifying an employee to hourly?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Technically, yes—but it’s complex. To remain exempt, the employee must still meet the duties test and be paid on a salary basis. Paying hourly often nullifies that status. It’s safest to treat hourly workers as non-exempt." }, "name" : "Can exempt employees ever be paid hourly?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "As of June 2025, it’s $684/week or $35,568/year. Higher thresholds may apply in certain states." }, "name" : "What’s the current federal salary threshold for exemption?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Yes, employers can reclassify an employee from hourly back to salaried (exempt) status—as long as the employee meets the FLSA's salary and duties tests at the time of the change. However, doing so repeatedly or without a clear business rationale can raise red flags with the Department of Labor.\nIf the changes appear to be a way to avoid paying overtime or complying with wage laws, they may be scrutinized during an audit or investigation. Best practice is to make classification changes only when there’s a legitimate, documented reason—such as a substantial change in job duties or compensation." }, "name" : "Can I switch someone back to salary later?" } ] } ```