Guidelines For Pro-Rating Pay For An Exempt Employee Upon Separation

Chairman's Circle Federated Insurances answers the question, "We have an exempt employee that separated in the middle of a workweek. We prorated his salary that week to reflect only the days he worked. He is coming back now stating that he had worked 40 hours that week before he left. Does that have any bearing on the pay, or are we ok with leaving it as is?"
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/// Guest post by contributor Jerry Leemkuil, Federated Insurance

Guidelines For Pro-Rating Pay For An Exempt Employee Upon Separation 

Today Federated Insurance is sharing one our “HR Questions of the Month” regarding employment-related practices liability issues. 

Question:
"We have an exempt employee that separated in the middle of a workweek. We prorated his salary that week to reflect only the days he worked. He is coming back now stating that he had worked 40 hours that week before he left. Does that have any bearing on the pay, or are we ok with leaving it as is?"

Response:
Exempt employees generally must be paid their full weekly salary for all workweeks in which they perform any work.

There are, however, certain limitation exceptions to this rule.

Specifically, if an exempt employee starts or ends employment mid-workweek, the employer may prorate the employee's salary accordingly.

As for calculating the deduction, the Fair Labor Standards Act (FLSA) does not mandate one specific method for prorating an exempt employee's salary in situations where deductions are permitted. Rather, 29 C.F.R. § 541.602(c) says that an employer may "use the hourly or daily equivalent of the employee's full weekly salary or any other amount proportional to the time actually missed by the employee." Thus, there are a number of methods the employer may utilize.

To that end, it is certainly permissible for an employer to calculate a day rate and then multiply by the actual number of days worked, regardless of the number of hours actually worked. In other words, the number of hours do not have any bearing on the pay if the method you used to prorate the employee's salary was the daily (rather than hourly) equivalent of the employee's full weekly salary.

See the full text of the statute here


{Guest Post} Guest post provided by Jerry Leemkuil, Federated Insurance. For more than a century, Federated Insurance Companies has provided peace of mind to business owners through valued insurance protection. Learn more about Federated Insurance.

The opinions and advice given by guest post contributors are not necessarily those of NATSO Inc. The posts should not be considered legal advice. Qualified professionals should be sought regarding advice and questions specific to your circumstances.

This article is intended to provide general information and recommendations regarding risk prevention only. There is no guarantee that this information will result in reduced losses, lower premiums, or lower experience modification factors. The content provided is accurate as of February 2015 and is subject to change. This information may be subject to regulations and restrictions in your state and should not be considered legal advice. Qualified counsel should be sought regarding questions specific to your circumstances and applicable state laws. © 2014 Advisors Law Group, All Rights Reserved

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Email: twlazlowski@natso.com

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