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Welcome to the Compensation Tools area.
Here you will find formulas, guidelines and technical material for the compensation practitioner.

FLSA Exemption Criteria

Effective August 23, 2004

On July 24, 2004, the United State Department of Labor issued new rules regarding eligibility for overtime under the Fair Labor Standards Act. The new rules will go into effect on August 23, 2004 unless some unexpected action by the Congress occurs to block implementation. As of this date, there have been attempts to block implementation but nothing, as yet as passed. Even if Congress does act to block implementation, the President has indicated that he will veto any such attempt thereby requiring Congress to muster a 2/3 majority which, to date, has not been possible.

Following this introduction, you will find a checklist that outlines the various tests for exemption that have been outlined in the new rules. The new rules are easier to follow and determining the exemption status should be much easier than it has been in the past for many jobs. In applying the applicable tests to the job, it is important that you have a thorough knowledge of the job in question including its essential duties and the required knowledge and skill needed to perform the work. This will involve a thorough analysis of the individual position or, potentially, all positions within the job classification. You will need the information to appropriately determine whether the duties meet the criteria specified by the Department of Labor. Failure to correctly determine the exemption status can result in substantial additional cost to the employer; either through paying overtime to positions that could be exempt or incorrectly exempting a position or job classification thereby subjecting the employer to substantial back pay and penalties should the affected employee ever dispute their exemption status.

Fox Lawson & Associates, a division of Gallagher Benefit Services, Inc can assist you in analyzing the work performed by individual positions or groups of positions and then recommend the appropriate FLSA exemption status, should you need assistance in performing these tasks.

Exemption Worksheet (All Tests)

Employee: _____________________________

Job Title: _______________________________

Department: ____________________________

Date: __________________________________

The employee must meet all of the requirements of one of the exemption tests as outlined below to be eligible for exemption under the FLSA. (Employees earning more than $100,000 in total annual compensation are only required to customarily and regularly perform one of the exempt duties of the Administrative, Executive, or Professional tests.)

Please indicate the exemption test that applies to this employee and complete the corresponding exemption test matrix below:

Administrative

Executive

Learned Professional

Creative Professional

Computer Professional

Outside Sales

Administrative Exemption:

 

Requirement for Exemption

Does employee meet the requirement?

Describe how employee meets the requirement?

Salary

$455/week

 

 

Duties

Primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer's customers

Exercises discretion and independent judgment with respect to matters of significance

 

 

 

Executive Exemption:

 

Requirement for Exemption

Does employee meet the requirement?

Describe how employee meets the requirement?

Salary

$455/week

 

 

Duties

Primary duty of managing the enterprise or a recognized department of subdivision

Customarily and regularly directs the work of two or more other employees (or their equivalent)

Has the authority to hire or fire other employees (or whose recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees are given particular weight)

 

 

 

Learned Professional Exemption:

 

Requirement for Exemption

Does employee meet the requirement?

Describe how employee meets the requirement?

Salary

$455/week

 

 

Duties

Primary duty of the performance of work requiring advanced knowledge, defined as work, which is predominantly intellectual in character and includes work requiring the consistent exercise of discretion and judgment

Advanced knowledge must be in a field of science or learning

Advance knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction

 

 

 

Creative Professional Exemption:

 

Requirement for Exemption

Does employee meet the requirement?

Describe how employee meets the requirement?

Salary

$455/week

 

 

Duties

Primary duty of the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic endeavor

 

 

 

Computer Professional Exemption:

 

Requirement for Exemption

Does employee meet the requirement?

Describe how employee meets the requirement?

Salary

$455/week or $27.63/hour

 

 

Duties

Employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field performing the following duties:

  1. Application of systems analysis techniques and procedures, including consulting with users to determine hardware, software, or system functional applications, OR

  2. Design, development, documentation, analysis creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications, OR

  3. Design, documentation, testing, creation, or modification of computer programs related to machine operating systems, OR

  4. A combination of duties described in (a), (b), (c), the performance of which requires the same level of skills

 

 

 

Outside Sales Exemption:

 

Requirement for Exemption

Does employee meet the requirement?

Describe how employee meets the requirement?

Salary

None Required

 

 

Duties

Primary duty of making sales (any sale, exchange, contract to sell, consignment for sales, shipment for sale or other disposition including the transfer of title to tangible property, and in certain cases of tangible and valuable evidences of intangible property), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client of customer

The employee must be customarily and regularly engaged away from the employer's place or places of business

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Calculations of Minimums, Midpoints & Maximums

Given either a minimum, midpoint or maximum, and a range spread (RS), the two remaining figures may be calculated by producing a factor from the formulas in the following table and multiplying by the known quantity.
To find:MinimumMidpointMaximum
If known figure is:
Minimum ((2+RS)/2)(1+RS)
Midpoint(2/(2+RS)) ((2+(2*RS))/(2+RS))
Maximum(1/(1+RS))((2+RS)/((2+(2*RS)))) 
For example: If a given maximum salary is $1,500 and the desired range spread is 40%, then the midpoint salary may be found by selecting the appropriate factor formula from the table, then inserting the range spread (RS) of 40%, and multiplying by the salary of $1,500:
((2+.40)/((2+(2*.40))))*$1,500, or(2.4/2.8)*$1,500 = $1,286
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How to Calculate Pay Range Width

CALCULATION OF SALARY RANGE WIDTH

RANGE SPREADMINIMUM*MAXIMUM*MINIMUM IF JOB RATE IS MAXIMUM
15%0.9301.0700.870
200.9091.0910.833
250.8891.1110.800
300.8701.1300.769
310.8661.1340.763
320.8621.1380.758
330.8581.1420.752
340.8551.1450.746
350.8511.1490.741
360.8471.1530.735
370.8441.1560.730
380.8401.1600.725
390.8371.1630.719
400.8331.1670.714
410.8301.1700.709
420.8261.1740.704
430.8231.1770.699
440.8201.1800.694
450.8161.1840.690
460.8131.1870.685
470.8101.1900.680
480.8061.1940.676
490.8031.1970.671
500.8001.2000.667
* Calculation from midpoint
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Pay Structure Design Generator

Pay Structure Generator

IMPORTANT: If you would like to purchase a copy of our Pay Structure Generator application, please fill out our contact form and we will get back to you with pricing information. Please indicate in the comments box that you are interested in the "Pay Structure Generator."

This generic pay structure tool generates a pay structure with the feature that the midpoint pay at each successive grade is a fixed multiple of the midpoint pay of the prior grade. It is thus suitable for use when pay increases are granted as a percentage of the current incumbent's pay, or especially as a percentage of pay at the midpoint of the incumbent's grade. A percentage of current pay approach is often used in merit pay programs.

The formula used by the program to generate structures is as follows:

Such a formula is curvilinear on standard Cartesian axes, but graphs as a straight line on a semilogarithmic scale. Graphs are included which are linked to the structure you generate.

The application will automatically derive the multiplier based on your specification of the midpoints of the lowest and highest grades, and the number of grades (or steps) desired. Optionally, if you unprotect the sheet, you can specify the multiplier. You may want to do this as a final step in order to get a structure based on a rounded multiplier. Note that if you substitute your own multiplier for the one derived by the application, the midpoint of your highest grade will no longer be controlled by the figure you had entered as the midpoint of the highest grade.

A structure leverage factor is also provided to directly adjust the above equation to account for regional or other variations of a base structure.

This application also allows you stipulate a range spread evenly on each side of the midpoint, expressed as the percentage of the minimum pay that you desire the range spread to be at that grade. You can even stipulate one range spread at the lowest grade of the structure, and a different range spread at the highest grade. The application will interpolate the range spreads at all other grades using an exponential formula similar to that used to generate the midpoints that gradually "fans" out the spread.

Another feature of the application allows you to specify the level of rounding of the minimum, midpoint, and maximum pay points generated for your structure. This can be controlled by entering a number in the specified cell which equals the number you would use in Excel's ROUND function. You can round in increments of factors of 10 (e.g., to the nearest penny, 10 cents, dollar, $10, or $100).

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