Two month ago, I started to answer a few readers questions about cutting hours and pay for exempt and non-exempt workers. I promised a second post of the subject: this is it.

Here are the questions I still need to answer:

"[...] can a person be determined exempt for the reason of “Professional” when he/she only works 10 months out of the year, furloughed for 8 weeks to go on unemployment benefits, then return to work?"

"[...Given the downturn in our business] our exempt and non-exempt employees would be willing to trim their hours from 40 hours to 32 hours per week (get paid for 32). Having said that, I wanted to verify if this would violate any FLSA benefits and/or rights for either classification (exempt or non-exempt)."

"I am an exempt employee; can my company strongly request that I volunteer to take 2 days off without pay in order to help meet the annual budget?"

These questions are basically the same; can salaried employees "ready, willing, and able to work" be paid less than their full salary? The simple answer would be no, but nothing is ever simple.

Are you paid your full salary, or is your pay already on a furlough? Find out with a PayScale free salary report.

Despite my mother's wishes, I am still not a lawyer

See the previous post for caveats and sources; suffice to say, I am still not a lawyer, and this is still not legal advice.

See even earlier posts for the difference between exempt (hourly) and non-exempt (salaried) workers under Federal law, in particular the Fair Labor Standards Act (FLSA).

I will continue to ignore a few categories of exempt workers: government employees (exempt do not need to be paid during a budget required furlough), outside sales representatives (no minimum hourly wage or salary required), and teachers (no minimum hourly wage or salary, and no overtime requirements).

Hence "Susie Screwed", who commented on my previous post, is aptly named. As a public university, her employer likely can declare budget required furloughs (time off without pay) to reduce expenses. Since she is a teacher, there is also no federal minimum hourly wage or overtime rate.

I hope she has a strong union or state labor laws. However, both are unlikely, since she is in the southeast, not a hot bed of labor law or unionism.

Her best backup plan is to eat cheese sandwiches and lentil soup; both are high in protein and low in cost.

10 Months per year for a salaried employee?

The first case, a professional exempt employee who is laid off for 2 months a year and collects unemployment, reminds me of British graduate students, at least as they were in the early 90's.

Back then, every UK graduate student "went on the dole" for the summer, as a way to get paid during their summer holiday. I was jealous, since they got summers off, and money to live on.

Clearly, the company could fire the employee after 10 months, and the employee could go on unemployment. The odd feature is that this is recurring every year.

The actually arrangement definitely looks like it is pushing the limits of the "bona fide salary reduction", due to economic conditions, allowed for exempt workers.

The Department of Labor opinions I can find appear to say that the minimum weekly salary still must be paid (currently $455/week), no matter how "short" the work week becomes. Hence if this person were paid 8 x $455 for the summer, and did not have to show up to work, that would be legal.

The gray zone is that the "ready, willing and able to work" clause requiring pay is in the same paragraph of the regulations that also say, "exempt employees need not be paid for any work week in which they perform no work."

If the professional showed up at work and sat around for a few hours each week during the summer, the employer may obligated to pay at least the $455 minimum. If s/he never comes in, the employer can pay nothing.

This is related to taking weeks off "voluntarily". That is the subject of the next questions.

Whether collecting unemployment during "voluntary" time off is legal under unemployment laws, I have no idea.

I am amazed how far companies go to avoid having to pay their employees overtime under FLSA. This is clearly a case where a non-exempt employee, paid an hourly wage, could simply not be paid for the summer.

Do you "volunteer" not to be paid?

The last two questions are about exempt workers agreeing not to work and not be paid.

The rule here is very clear: if, for the employee's benefit, an employee does not work during a given week, the employer does not have to pay the salary for that week.

It is also clear that, if the employee is "ready, willing, and able to work" during a week, the employer must pay the full weekly salary, whether there is work to do or not.

However, what happens if the employer asks for "volunteers" to take time off without pay? This makes me think of the Sarge asking for "volunteers" for a suicide mission in a World War II movie. He usually looked someone in the eye, making it clear that soldier was supposed to volunteer.

An employer does not have to pay for time a worker is away for work for true "voluntary" time-off. For this kind of voluntary time off, particularly if there is a general time-off plan, pay can be reduced in daily increments.

As mentioned above, employers also do not have to pay for any week when no work is done.

The second case - reducing every exempt employee's pay for the difference between a 40 and 32 hour work week - is likely legal, as long as the pay does not go below $455/week.

This doesn't really have to do with voluntary time off. The employer could cut wages, and require the salaried workers to continue to work 40, 50 or even 70 hours a week, if that is what it took to do their jobs.

However, this employer is trying not to be a jerk, so is indicating they expect the employee will do 20% less work per week, usually by not working one day. This is likely fine.

For the third case - two days of unpaid time off to make the budget - likely is trouble for maintaining exempt status, even if the time off is voluntary. The lawyers at Davis Wright Tremaine recommend whole workweek "voluntary" time-off only.

The reason is simple: less than full week deductions of pay are only to be made when the time off was for the benefit of the employee - the employee asks for the time off for his/her own use.

When the employer requests the days off for business reasons, and the reduction in pay is less than a week, the notion that the employee is "salaried" (paid a fixed amount per week), is called into question, and with it the exempt status.

So it goes. The answers to the three questions are yes, yes, and no, but each answer has caveats. No wonder it is a good idea to consult a lawyer when trying to understand labor law.

Exempt or not, are you being paid what your worth? When you want powerful salary data and comparisons customized for your exact position or job offer, be sure to build a complete profile by taking PayScale's full salary survey.

Cheers,

Al Lee

• Curious about salaries? Email Dr. Salary
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This question came via the Seattle Tech Startups mailing list:

How do you adjust for the recent changes in comp packages brought about by recession, layoffs, unemployment rates, etc? Or don't you?

It would seem to me that data from 8+ months ago is probably quite different than data from the recent 2-4 months...

The simple answer is that about half the data PayScale now uses were collected since October 1. We also look at any trends in the data over the last year, and target our reports to reflect our best estimate of what a job paid 90 days ago.

If there were a big shift in pay for a job in the last six months, our current reports would show the typical pay as of January first. No other salary survey has or uses data this fresh.

However, this answer is missing the point.

Implicit in the question is that employers reduce costs in a recession by reducing the pay to workers. The real answer is more complex, and is the subject of this post.

Are you being paid what you are worth today? Even in a recession, some jobs are in high demand. Find out with a free PayScale salary report.

How employers get more value for money

There are at least three components to the employer-employee contract:

1. Work week (quantity)
2. Worker productivity on the job (quality)
3. Pay

As discussed in my recent post on average wage increases in a recession, lowering a worker's pay is usually the last tool employers use.

Ahh, I'm also gonna need you to go ahead and come in on Sunday, too...

The first strategy employers try is to increase the number of hours worked per week. This works best for “exempt” workers, also called salaried, and who are not paid per hour worked, like most high tech knowledge workers.

For example, one way to do this strategy is to lay off 20% of the exempt workers, and expect the remaining workers to continue to produce the same total team output.

As long as worker productivity is proportional to hours worked (not the best assumption, but good in the short run), having each worker put in 50 hours a week instead of 40 should make up for the missing staff.

This is trickier for hourly "non-exempt" workers, since those longer hours in principle have to be paid at higher overtime rates. However, there are tricks for non-exempt too: "salaried non-exempt" is an amazing, legal, device that seems, based on emails to Dr. Salary, to be the approach of choice in the downturn. That is the subject for another column.

Work smarter, not longer

The second strategy is to increase worker productivity per hour. At first blush, this seems hard. Are not workers already as productive per hour as they can be? It is not as hard as one might think, because worker pay does not grow linearly with productivity.

For example, by laying off the 20% of workers who are least productive, the average productivity per worker goes up.

Since more productive workers are not paid 100% of their greater productivity, even if the remaining workers actually earn more per hour than the ones who were laid off, total production per dollar can still go up.

As I discussed previously, this is why average wages can go up at a company that has had layoffs.

This is particularly true in software development, because of the incredible range of productivity (see the Mythical Man-Month for a historical view).

As a software program manager, not developer, I was enough on the outside to see this phenomena first hand. The higher productivity of the best developers can be much more valuable to the company than the extra money they earn.

Who was the cheapest developer I knew at Microsoft, in terms of amount of useful software produced per dollar paid? The one who earned over $500,000 per year (salary and stock). He produced more flawless code in 2 days than most produced in a month, and the other developers were no slouches.

He also was a better program manager, in the sense of knowing what the right features to produce were and in his ability to write specs, than most (all?) of the program managers. Needless to say, his productivity was hard on morale for the team who worked with him. :-)

Hire only the best...for less

When unemployment is high, an employer can effectively get more, higher quality, work for less, without actually paying less.

For example, in Seattle as for January 1, experienced senior software developers working for small tech companies are paid between $77,000 and $121,000 per year (10th to 90th percentile).

Consider a company that advertises for this position with a budget of $90,000.

When times are good, they may have hired someone with a bachelor's degree from a lesser school, 8 years experience, and some solid application development experience on internal corporate applications.

Now they may be able to hire someone with 10 years experience, a CS degree from Stanford, and impressive multi-threaded server-side coding experience at high scale consumer web startup that went belly up.

The company isn't paying less, they are just getting more for the same price, often in characteristics that are not tracked in traditional compensation surveys.

But employers do pay less in a recession, right?

Reducing pay of existing employees is the third, and least used, knob in an employer’s tool set for controlling employee cost in a recession. It does happen that existing salaried employees have their salaries cut, but this is not the common case.

Traditionally, not giving raises, and letting inflation take the money back, was the approach of choice (think the 70's) for cutting wages. However, we are currently in a low inflation to deflationary environment, so this trick doesn't work.

The second approach is to cut back "variable" pay. Part of the reason most large companies give ~10% bonuses to most of their salaried employees is the ease with which this can be trimmed. If everyone gets a less than stellar review, and the average "performance" bonus is reduced to 6%, effectively wages have been cut by 4%.

At PayScale, we are tracking wages closely, looking for actual decreases in wages.

We are definitely seeing that, for people who still have a job, wages for most jobs are not going up 5% a year, as was common for a lot of Seattle tech jobs last spring.

But wages also are not, yet, going down.

Since we track these more subtle differences in worker quality, we should be able to see employers getting more for the same money. We will let you know when we do.

In the current economy, it is important to know what you are worth. When you want powerful salary data and comparisons customized for your exact position and qualifications, be sure to build a complete profile and get an accurate report by taking PayScale's Full Salary Survey.

Cheers,

Al Lee

• Questions? Email Dr. Salary

• Compare your salary: Get a free Salary Report

With thousands of recent lay-offs, and a hiring freeze at many employers, now is a good time to consider concentrating your job search efforts on a "dream job".

Dream jobs require little or no formal training to get started, and are a way to pursue a hobby, enjoy more leisure time, and/or socialize with all types of people. The pay for these jobs is often lower, but you can be vastly rewarded with more fun, less stress, and shorter work weeks.

In this blog, I will look at a variety of dream jobs and what they pay.

Are you curious about the salary of your dream job? Find out using PayScale's Salary Calculator.

25 Dream Jobs

Below is a table listing 25 dream jobs and their national median hourly pay. We define pay as a combination of base annual salary or hourly wage, bonuses, profit sharing, tips, commissions, and other forms of cash earnings as applicable. The majority of the people doing these jobs work on a part-time basis and for this reason we focus on hourly pay.

The above jobs generally break down into three categories: Food/Drink Preparation, Artistic/Creative, and Athletic/Outdoors. Below is a listing of jobs under these categories.

There are four jobs that do not fall into these specific categories: Small Business Owner, Game Tester, Event Coordinator, and Wedding Consultant.

A Small Business Owner could be in any of these categories depending upon the product/service they produce. For example, the Small Business Owner could run a bakery, a dance studio, or a sports supply store.

Some of my friends say that game tester is an athletic job, at least if it is for a Wii :-)

Finally, while Event Coordinators and Wedding Consultants require extensive project planning, they are both appealing for the creativity and human interaction, in the same sense that being a Movie Producer is a creative position.

Food/Drink Preparation

1. Winemaker
2. Brewing Manager
3. Bartender
4. Cake Decorator

There is a wide range in tasks for Food/Drink Preparation jobs. Winemakers and Brewing Managers help create wine and beer from the ground up, while Bartenders take these products and serve them to the general public. There is a high degree of social interaction with Bartenders, which can result in increased income from customers' tips. Cake Decorators put their artistic talents to use by turning otherwise plain cakes into beautiful masterpieces. This is a job which takes a lot of skill and a steady hand.

Artistic/Creative

1. Fashion Designer
2. Musician or Singer
3. Actor/Actress
4. Fashion Stylist
5. Fine Artist
6. Dancer
7. Make-up Artist
8. Photographer
9. Hairdresser
10. Dog Groomer
11. Florist

Several jobs within the artistic category include some degree of performance. Musicians, Actors, and Dancers share their art with an audience. Musicians can play as part of a symphony, a band, or a jazz group. Actors can be on screen, on stage, on TV, in commercials, or work as voice actors. Dancers can be part of a concert tour, a ballet troupe, on Broadway, or in the background of a music video.

Several other jobs within the category use artistic talent to improve the outward appearance of clients in a variety of settings. For example, a Make-up Artist may be helping a bride on her wedding day, or a troupe of stage actors before a big show.

Athletic/Outdoors

1. Coach
2. Fitness Trainer or Aerobic Instructor
3. Dog Walker
4. Tour Guide
5. Ski Patroller
6. Lifeguard

The majority of these jobs tend to be seasonal. Someone who works as a ski patroller during the winter might transfer to a lifeguard position in the summer. The work schedule of coaches will vary according to the sport and the level of competition. Fitness Trainers and Tour Guides might be able to work year-round, but will certainly see fluctuations in their schedules over the course of the year. For example, a Fitness Trainer might have more customers during the summer months (swimsuit season) or after New Year's (resolutions).

What type of salary can you expect for your dream job? The PayScale Salary Calculator is a quick and easy way to compare positions. When you want powerful salary data and comparisons customized for your exact position or job offer, be sure to build a complete profile by taking PayScale's Full Salary Survey.

Regards,

Katie Bardaro
Research Analyst, PayScale, Inc.

• Curious about salaries? Email Dr. Salary

• Compare your salary: Get a free Salary Report