Exception time reporting

Whenever possible, try to exclude employees from your time tracking system. Instead, create a standard amount of hours worked, and only have them record their time worked if it varies from the predetermined amount. This is time tracking by exception, and works well for many positions where employees engage in essentially the same activities every day, and for the same period of time. Time tracking by exception is an excellent solution when employees do not see the need to continually submit time reports that document the same activities; in this situation, employees are much less likely to submit their time sheets on a timely basis, so the payroll staff must spend extra time reminding them to do so.

Another form of employee exclusion is to switch employees from being paid on an hourly basis to being paid on a salaried basis. By doing so, you eliminate the need to track their time at all, at least for the purpose of computing their pay. However, if an employee is salaried but his time is billed to customers (as is the case for a consultant), then you must still track his time; in this situation, it makes no difference if the person is classified as hourly or salaried, since you must still track his time.

Converting an employee to salaried status will likely only apply to a very small proportion of employees, since this status is governed by federal regulations. The key guidelines for designating a person as being eligible for a salary are as follows:

  • Administrative. Those in charge of an administrative department, even if they supervise no one, and anyone assisting management with long-term strategy decisions.
  • Executive. Those who manage more than 50% of the time and supervise at least two employees.
  • Professional. Those who spend at least 50% of their time on tasks requiring knowledge obtained through a four-year college degree (including systems analysis, design, and programming work on computer systems, even if a four-year degree was not obtained). The position must also allow for continued independent decision making and minimal close supervision.

Even if you have identified an employee as being potentially convertible from an hourly to a salaried position, the employee may perceive this as an attempt to deny him overtime pay. If so, you may have to offer a higher salary in order to mollify the employee, which may be a sufficiently large pay raise to negate any possible efficiency improvement from having to no longer track the person’s hours worked. Thus, converting employees from hourly to salaried pay is an interesting concept, but is only applicable in a minority of situations.

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Payroll Management