Quick-what's the difference between an exempt and a
non-exempt employee? It's a tough question, but getting the
answer wrong could cost you big money. "We're often
contacted by small businesses who should have called us long before
they do and now have to pay much more than they should have, either
in court or in dealings with state and federal administrative
agencies," says Sandy Henderson, president of Human Resource
Specialties Inc., a consulting firm in Lake Oswego, Oregon.
"A small business needs professional human resources help
virtually from start-up. The better you set up your systems and
paperwork at the front end, the more likely you will be able to
avoid unpleasant and expensive situations later," adds
Henderson. "Good HR can give you the help you need to not step
in a mud puddle."
A case in point: our opening question about exempt vs. nonexempt
employees. "So many entrepreneurs get this one wrong,"
says Ethan Winning, a Walnut Creek, California, HR consultant. The
bottom line is pay. Nonexempt employees, by law, must be paid for
overtime hours, but exempt employees don't have to be-and
that's why it's tempting to rename a secretary, say, an
administrative assistant and call the position exempt. But a
"job title is not a criterion in determining exempt status,
although many entrepreneurs think it is."
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Exempt employees must manage a function, supervise two or more
subordinates, and use independent judgment and discretion in
performing their jobs, according to Winning, who cautions that many
gray areas are involved. That said, however, few administrative
assistants qualify as exempt.
Why is this a big deal? Misclassify an employee as exempt, and,
later, if the employee leaves, he or she may march down to the
state wage and hour agency to file a claim for hundreds, even
thousands of hours in back overtime pay.
The good news: Such goofs and penalties can be sidestepped with
just a tiny amount of professional HR help, says Henderson.
"HR often is bewildering to nonexperts," she says.
"There are federal laws, state laws, and there are also
federal, state and sometimes local regulations regarding workplace
issues. And there are so many wrinkles. For instance, most states
require a business to display posters pertaining to wage and hour
issues in the workplace. But how many small businesses know this-or
any of the hundreds of other laws that impact them?"
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