One of the most common issues HR professionals encounter – and have questions about – is properly classifying employees. There are so many categories of classification to begin with, and that is further complicated by the fact that some are left to the employer’s discretion, some are legally-defined, and some overlap. While there is no one-size-fits-all answer to classifying your employees, below is some general information that should help you to begin clarifying things.
Hourly / Salary / Commission & Exempt / Non-exempt:
Companies determine how they will pay their employees. Employees are usually paid either hourly (only for actual time worked), by a salary (a guaranteed wage per pay period), or by commission (a varying wage based on sales or production).
Further, there are non-exempt and exempt employees. Non-exempt employees must be paid at least minimum wage for all hours worked and time-and-a-half for any work time over 40 hours. Exempt employees are paid a set salary without concern for minimum wage or overtime. The Fair Labor Standards Act (FLSA) dictates whether an employee is one or the other, and that employees can only be exempt if they meet the definitions set by the FLSA.
Based on FLSA requirements, salaried and commissioned employees may be, but are not automatically, exempt. Except in a very few circumstances, hourly employees are always non-exempt.
Full-time / Part-time:
Companies typically set the threshold for how many hours constitute full-time employment, which usually impacts eligibility for benefits such as paid time off and insurance. This can be based on the company’s normal work schedule or expectations. While some employment laws set the definition of full-time, companies are still able to define it for company-specified benefits.
Regular / Temporary / Introductory:
Regular employees are consistently on the payroll every week with no specified end date. Employers should avoid defining these employees as “permanent” as that can inadvertently lead to the presumption of an employee contract or guarantee of employment.
Temporary employees are hired for a limited time period, such as a special project or to meet seasonal demands.
Companies may establish an introductory period during which new hires receive additional training and performance evaluations, and may not be eligible for company benefits.
There are many other factors to consider when establishing employment classifications, such as maintaining employment-at-will or if you’re operating under a collective bargaining agreement. We recommend regularly reviewing how you classify your employees, especially in response to changes in your company’s structure or to employment laws.
[Note: This is based on federal regulations, but several states have different regulations to consider as well.]
Claudia St. John is President of Affinity HR Group, Inc., a national human resources consulting firm serving hundreds of clients nationwide. With more than 20 years of experience in human resources, employee engagement, and organizational development, she is an author and a frequent public speaker who contributes regularly to publications on the topic of human resources.
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