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Reducing salaries: The impact on exempt status

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in Leaders & Managers,Management Training

Q. Legally, is there a difference between exempt employees “volunteering” their time or being required to reduce their salaries (or work hours) during these slow economic times? — D.W., Nevada

A.
Many employers are searching for ways to cut labor costs to avoid layoffs. But cutting expenses with exempt employees is tricky because, under the Fair Labor Standards Act, those employees must be paid a set salary in any week they perform work, regardless of the number of hours worked.

Whether the employee volunteers to take a cut in pay or the cut is imposed by the company doesn’t make a difference. While it’s fine in response to a salary reduction to relax your expectations regarding the employees’ work schedule, keep in mind that exempt employees are not paid based upon their hours worked.

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