Bill-Ability and Salaries

Some employers are confused about how their exempt employees can maintain exemption status when the company has clients that are billed for labor on an hourly basis.

Many employers believe that there’s a problem with paying an exempt employee on an hourly basis. They should have a problem.  Most times it is not permitted.  However, some exempt employees can be paid hourly, believe it or not. Teachers, physicians, lawyers, and computer professionals paid at a certain (high) rate are all examples of exempt employees that can be paid hourly. Yup!

[I know you knew that, but some readers didn’t, so we have to tell them.]

Many of those same employers wonder how in the world they can bill their clients by the hour when their exempt project managers, engineers, analysts, counselors, technical writers, economists, and so on are paid salaries.

The answer is easy!

Track the hours worked, for billing purposes, not for pay purposes (because you can’t pay a salary on an hourly basis), but pay the salary. It is that simple, really.

No, it is not unlawful to do record-keeping of the hours worked for exempt employees. Nothing prohibits an employer from keeping track of hours worked regardless of exemption status. Doing so does not jeopardize the exemption status of a position.

Yes, you will still make money, because your hourly rate will build in the fact that you have to pay a salary and benefits to the person filling the role. Some experts say that "G&A" and "FEE" and "OVERHEAD" all ought to be included in the hourly rate billed to the client.

A business consultant can help you figure out how to reach that figure.



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