Being Exempt

Obama_signs_Budget_Control_Act_of_2011

I came across this article today, and I wanted to both talk about it and hear from you.

I’ve never been a salaried exempt employee. I’ve never understood the appropriate situation to make someone exempt. I don’t even really understand the qualifications for exemption. However, what I do know is that if you are an exempt employee, you can work a ton of overtime for no extra pay. Most of my hourly friends would tell you that they would never take an exempt job because the real money is in the overtime.

That seems a little counterintuitive to me. Most of the salaried exempt positions that I know pay $80k per year or more, usually including fantastic benefits and no dock in pay for time off. The highest hourly year that I ever had, which included 80 hour work weeks away from my wife and newborn son, was $59,000. For a 22 year old guy, that was great money. The trade off was that I never saw my family. Was it worth it? No, although I wouldn’t trade having done it.

How do you quantify overtime on a salary, though? If an exempt employee is making $120k per year ($10k per month for easy math), is that based on 40 hour weeks, or is some overtime considered to be factored in, as well as some time off? How does that effect the pay scale, overtime rules, or terms of employment?

The way I believe overtime exemption works is that the owner of the company is offering that individual higher pay, and usually incentives, for an ownership level of involvement. Unpaid overtime is the same investment the owner makes, so he’s asking his top employees to make the same investment in the company. Those extra incentives are usually forms of profit sharing or shares of company stock, effectively entitling the exempt employee to the same privileges as the owner. Overtime pay sounds unnecessary at this point, as the agreement already seems fair.

I want to hear from you, though. Am I off here, or do exempt employees need to shed their exemption and receive overtime pay too?

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About the author:

Michael McNew
Web developer, marketing innovator, technology enthusiast, and founder of Visceral Concepts, Michael McNew has developed a passion for delivering value to small business, turning his creativity towards image and reputation building for small business owners.