Exempt Employees Must Be Paid in No Less Than Full-Day Increments in Business and at Work

Simply put, the best / most compliant way to pay exempt employees is in full-day increments, whether it’s exempt time worked or exempt paid time off. When employers erroneously pay exempt employees for partial days, generally speaking, they either:

• Don’t have onsite HR and/or Payroll professionals, and are consequently not aware of the compliance boundaries for exempt pay; and/or
• Especially since Albany is the capital of New York state, also home to a large population of public sector and/or union employees, private- / nonprofit-sector / nonunion employers tend to conflate all of the sectors because they have worked previously in the public sector themselves, and/or have friends and relatives who are public sector employees, where the compliance boundaries to pay exempt employees can vary.

However, the NYS and Federal Departments of Labor are crystal-clear as to what the compliance boundaries are for exempt pay. From the U.S. Department of Labor website:

What kinds of deductions are not allowed?

Deductions for partial day absences generally violate the salary basis rule (in other words – if exempt employees are paid in less than full-day increments, you’re paying them as if they’re nonexempt employees eligible for overtime) except those occurring in the first or final week of an exempt employee’s employment or for unpaid leave under the Family and Medical Leave Act. If an exempt employee is absent for one and one-half days for personal reasons, the employer may only deduct for the one full-day absence. The exempt employee must receive a full day’s pay for the partial day worked. Other examples of improper deductions include:

• A deduction of a day’s pay because the employer was closed due to inclement weather;
• A deduction of three days pay because the exempt employee was absent for jury duty;
• A deduction for a two-day absence due to a minor illness when the employer does not have a bona fide sick leave plan, policy or practice of providing wage replacement benefits; and
• A deduction for a partial day absence to attend a parent-teacher conference.

Deductions from pay are allowed:

• When an employee is absent from work for one or more full days for personal reasons other than sickness or disability;
• For absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness;
• To offset amounts employees receive as jury or witness fees, or for temporary military duty pay;
• For penalties imposed in good faith for infractions of safety rules of major significance;
• For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions;
• In the employee’s initial or terminal week of employment if the employee does not work the full week, or
• For unpaid leave taken by the employee under the Federal Family and Medical Leave Act.

In addition, deductions may be made from the pay of an exempt employee of a public agency for absences due to a budget-required furlough, and special rules apply when such employees take partial-day (or hourly) absences not covered by accrued leave.

Each of these allowable deductions is described elsewhere in the Compensation Requirements section.

Do you ensure that your exempt employees are paid in no less than full-day increments, in business and at work?