Most employers would not even think about tracking time for salaried (exempt) employees. The consensus amongst business owners and payroll experts is that salaried employee hours should not be tracked. Get the popcorn out, as I'm about to lay out an entirely new set of rules for you. According to the Bureau Of Labor Statistics, nearly 59% of Americans are hourly, and the remaining 41% are salaried. This article will explore the various reasons you should at least consider logging salaried/exempt hours.

First Off, How to Decide to Pay Salary vs. Hourly

One of the primary deciding factors is whether the position is full or part time. Businesses like to have a clear expectation of what expenses they will pay each month. If part-time, hourly pay is generally the clear choice as worked hours may fluctuate from week to week. When designating a position as salaried, the employer can expect a fixed payroll budget for a fixed amount of worked hours. Even if the employee works extra hours, the bill remains the same. At first glance, this seems to be only in the company's interest. However, typically, salaried employees' yearly pay is equal to (or greater than) their hourly counterparts. Another benefit for salaried employees is that they enjoy a consistent paycheck, even if the weekly hours vary. There are also DOL mandates that govern pay status. Positions such as executive, administrative, and professional may require set salaries. Lastly, some employers simply do not want to deal with a time clock. Salaried positions look very appealing to them.

Increased Accountability

Time theft is committed by all employees, and the statistics are the same for salaried and hourly alike. Yes, I said time "theft." If you have employees who agree to work a certain amount of time but do not put in the hours (yet they get paid for those hours), this is basically stealing time (money). According to studies by the APA, time theft translated to about a 7% overpayment in gross payroll in U.S. companies. Most likely, your salaried employees signed an employment contract. This contract typically lays out the terms of employment, including the hours the employee is expected to work each week and the company's responsibility to compensate them for the hours they've worked. If an employee arrives late to work or takes long lunch breaks, he or she is most likely breaching the contract. If the employee is breaching the contract, you should consider this time theft. Using a time tracking system would mostly eliminate these issues.

Increase Morale and Camaraderie

Many times, hourly employees may have a jaded view toward their salaried teammates. They're left wondering why they're the only ones who are forced to punch a clock. This is understandable, as, historically, the time clock has created a separation in companies that is undeniable. The old management vs. labor stigma is alive and well even in our current times. One of the leading proponents of this vision is the old-school time clock mounted on the wall. Some punch in and out, and some do not. Which category do you fall in? Adding a policy that requires all employees to track their hours may help remove this struggle. This policy helps everyone to know they are all on the same team.

Tracking PTO for Salaried Employees

Salaried employees receive paid time off (PTO) in various categories, such as vacation, sick, personal, and holiday hours. These days and hours, the company has agreed to pay the employee who falls outside the regular work schedule. Generally, if a salaried employee takes more time off than the hours allotted (or accrued), the hours are deducted from the employee's payroll. For instance, if Jennifer's company allots her five days off for vacation time, she may take five business days off, and her payroll will not be affected. However, if Jennifer wants to take seven days off for an extended vacation, there needs to be an adjustment to her payroll per the agreement. So, at some point, Jennifer's paycheck would reflect the two days of extended vacation as two days not worked. I suggest you reference this DOL page when deciding on your salaried employee PTO policy, as there are rules that must be followed.

Job and Project Costing

Many companies bill their customers based on time spent on individual jobs or projects. For instance, ACME Engineering (a fictitious mechanical engineering firm) has many engineers who work on various projects for many customers. Every month, ACME's customers are billed for the work their engineers have performed. This is a good fit for time tracking, specifically job and project hours tracking. Using a system to track hours allows accurate and fast reports for invoicing ACME's customers.

Unified Payroll Processing

Both salaried and hourly employees get paid using the same payroll department, or, if outsourced, payroll provider. Hourly employee hours and PTO are sent to payroll, and the result is the employee gets paid for the hours worked, taking into account any unpaid PTO hours. But how would you transmit unpaid PTO hours for salaried employees? Generally, this involves sending an email or some other manual communication outside of the time your hourly employees generally report. If you could send a single salaried and hourly report to payroll, this would be faster and more accurate.

How Can All this Be Accomplished?

Using an employee time clock, like OnTheClock, allows you to track all employee time, salaried or hourly. This will help unite your team as one focused productivity machine. All employees will be accountable for their time, and all employees will feel that things are fair. PTO tracking and payroll are consolidated into one system, saving you time and reducing errors.