Many agricultural companies pay supervisors, crew bosses, and foremen using daily rates. Such employees are not exempt from overtime because their daily compensation does not meet the federal law’s definition of being paid on a salary basis.
What is the definition of "Salary Basis" Under Federal Law?
Under the FLSA regulations (29 C.F.R. § 541.602(a)), being paid on a “salary basis” means that an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis that is not reduced because of variations in the quality or quantity of the employee’s work. On this point, “an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.
Employees paid a daily rate might appear to meet the salary level requirement for being exempt when looking at their yearly compensation. However, because such employees are not paid a guaranteed weekly amount regardless of the number of days worked, they are not paid on a “salary basis” according to the FLSA. Therefore, they are not exempt from overtime.
NOTE: There are other factors, including the employee’s duties, that determine if an employee is truly exempt from overtime compensation. Please carefully review the FLSA exemption rules, along with any state specific rules, before exempting an employee.
How Are Datatech Users Who Pay Daily Rates Affected?
If you use a daily rate method of compensation, you should set up a new Wage Type for the Daily Rates. This way, there is a distinction between Salary and Daily Rates in the program.
See Wage Type Setup for more details. The Base Pay Type for Daily Rates should be Piecework.
When entering pay for daily rates, the hours the employee worked should be entered in the PW Hours column:
When running the Daily Payroll Batch Report, select the Calculate Overtime Premium Hours/Rate option.
The Overtime Premium is calculated the same as piecework or hourly wages. The regular rate of pay, which is based on actual hours worked, will be used to determine the extra 1/2 premium owed to the employee.
NOTE: Overtime Premium on Non-Exempt Salary is calculated based on the regular hours only (40). Keep an eye out for a future post on “Overtime Premium on Non Exempt Salary”.