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Proper calculation of pay

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  • Proper calculation of pay

    Before I get into this, I know the way we pay is stupid. I inherited this system and have expressed my displeasure with it and my desire to change it.......

    We pay both salaried exempt and non exempt monthly. That would not be so bad but it is UP FRONT. Meaning on the 1st of the month you receive your salary for that month. Those that get overtime, well the overtime is actually delayed a month. Meaning, for example, overtime worked in August is paid the 1st of September.

    My question is, what is the proper way to calculate time for partial months. We actually have situations where an employee quits in the middle of a month and owes money back as well as situations where a new employee starts in the middle of the month and we pay a partial month.

    Accounting does it this way: Base monthly salary divided by total days in pay month times days paid: example $5,000 base salary for 5 days pay in June 2019:
    $5000/30 days in June/5 days paid=$833.33

    Some argue it should be yearly salary/52, which would be 60,000/52 =$1153.85

    Again, ignoring the fact that paying up front is not a good idea, what would be the correct way to calculate a partial month's pay?

  • #2
    What state are you in?


    • #3
      We are in Kentucky.


      • #4
        Legally paying Salaried Exempt and Salaried Non-Exempt are two very different things under federal law (FLSA). I will leave any KY specific rules to someone who actually knows them and stay with FLSA only.
        - There is nothing as in N-O-T-H=I-N-G in FLSA that supports annualizing anything salaried. Each pay period stands alone. Period. No exceptions for any reason.
        - If we are talking about Exempt Salaried only, then we are talking about FLSA regulation 29CFR541.602, which states with a few very specific exceptions spelled out in the regulation that the entire salary is paid without reduction irregardless of actual hours worked. If you are sure that the regulation supports the deduction then use a proportionate method. DOL has not spelled this out as well as anyone would like, but if you use a formula of hours-worked/hours-standard*salary, you will get a legal result. Assuming that the deduction was legal in the first place.
        - If we are talking about Non-Exempt Salaried only, then we are talking about a single very poorly worded regulation and a bunch of court cases. Short answer is pay MW/OT and the feds are fine. The state(s) might not be.
        - Monthly payment cycles are not legal in most states for private sector employers.
        - And yes prepaying wages is really stupid. Unrelated to all the above there are no federal rules explicitly allowing for recovery of wage over payments. Some states such as CA explicitly ban the practice.
        Last edited by DAW; 08-12-2019, 08:13 AM.
        "Reality is that which, when you stop believing in it, doesn't go away".
        Philip K. **** (1928-1982)