Monday, September 28, 2009

Exempt v Non-exempt issue and I.T. people

An important issue in the IT workplace can be “exempt” and “non-exempt” classification.

The colloquial explanation for “exempt” is, you don’t sign a timesheet or clock in. But what it really means is that you are paid a flat salary, and you have to work as long as it takes to complete a job, without overtime. For example, if you work all weekend before a major implementation, you are not entitled to extra pay if you are salaried.

Typically, “inhouse” programmers and systems analysts, as well as management, are exempt. Companies will try to retain the best employees with ad hoc bonuses or larger raises, and discretionary, “under the table” comp time.

Contractor are often hired as W-2, and are then paid hourly. That means in practice that they must work efficiently to avoid over-billing. Sometimes they are hired “corp to corp” and are salaried by the staffing company as exempt, although the staffing company can bill the client hourly. Typically consultants who want benefits must accept a “corp to corp” arrangement. In any case, contractors often must pay their temporary corporate housing out of their hourly rate (sometimes IRS rules work to their advantage if they work only 364 days in the year).

The IRS and the governments of many states (especially California), as well as the Department of Labor, have been looking at the exempt status question, partly because sometimes tax revenue is lost when employers don’t have to pay overtime.

Here’s a typical reference on “exempt v non-exempt” at Net Polarity, here.

Here is DOL's reference on the Fair Labor Standards Act (link).

The Family and Medical Leave Act of 1993 would apply to both exempt and non-exempt employees, but it has never been considered very effective for those having to meet "family responsibility".

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