Minimum Salaries Explained

I received quite a few emails telling me I had miscalculated the salaries in my last article but I wasn’t wrong. That means we should review exempt salaries.

State and federal laws have always used the same calculation to determine the minimum amount an exempt employee can be paid. The calculation is:

2 X minimum wage X 2,080 = minimum salary

There are two important things to remember about salaried exempt employees:

1. According to law, you must pay an exempt (salaried) employee at least twice as much as a minimum wage non-exempt (hourly) full-time employee.
2. The minimum salary is owed to an exempt employee no matter how many or how few hours they work.

If you only pay a portion of the minimum salary because that person only works part-time for you, you have automatically converted them to an hourly employee and now need to worry about overtime and meal breaks. If you pay exactly the minimum required but that employee takes off more sick time than they have available, you’ll still have to pay for those days off so the employee won’t earn less than the minimum.

Now that you have the calculation for minimum salary memorized, forget it. The feds are changing things and we expect the minimum salary to be $50,440 by November. This will no longer be based on a calculation; it’s just going to be the minimum allowed by federal law. Once the new minimum salary goes into effect, it will likely be adjusted each year based on the cost of living index.

You need to determine if each exempt position is worth $55,000 to your company. If it is, you may already be paying your employee that amount or more. If the value of that position is below $55,000 to you, start making plans to convert the position to non-exempt.

Why $55,000? Because you shouldn’t plan to pay only the minimum salary. You’ll regret that as soon as you find yourself paying for unearned time off just to keep that employee above or at the minimum.

Right now, the California minimum salary is $41,600. By the end of the year, we expect the minimum to be $50,440. That’s a huge increase and now is the time to be giving this some thought so you’re ready to take action later this year.