Guaranteed Pay Plans for Non-exempt Employees (Fluctuating Workweeks, Belo Plans, Etc.)

The amount paid to a nonexempt employee, even if salaried, is usually subject to adjustment with variations in hours worked. Where specific requirements are met, a nonexempt employee can be paid a fixed salary each workweek even though the hours vary from week to week. 
 
Fixed salary plans include fluctuating workweek plans, Belo plans, and certain other guaranteed pay plans. However, to be compliant, these are subject to strict requirements.  To establish a guaranteed pay plan, the employer must make sure employees understand how they are being compensated and agree to the payment plan as required. Employers must avoid practices that are considered as circumventing the minimum wage and overtime requirements of the FLSA.

• Know when a guaranteed pay plan makes sense for the employer.
• Comply with the recordkeeping requirements for fixed salary plans.
• Understand how a fluctuating workweek plan could be beneficial.
• Know which deductions from salary are allowed, and which are prohibited.
• Identify strategies that fail to meet FLSA standards and why they fail.
• Know how to handle FMLA leave under guaranteed pay plans.
• Investigate how paid time off is applied to the fixed salary.
• Know when bonuses are allowed under a fluctuating workweek plan.
• Apply the half-time pay method for computing overtime compensation.
• Techniques used to control overtime costs.
• Assure fixed salary employees are adequately compensated for overtime.
• Understand how Belo Plans differ from other guaranteed pay plans.
• Know whether workweek hours must fluctuate on both sides of forty hours per workweek.

• Various types of fixed payment plans and when they make sense for the employer
• Record-keeping requirements for fixed salary plans.
• Which deductions from salary are allowed, which are prohibited
• Programs that fail to meet FLSA standards and why they fail
• How to handle FLMA leave under guaranteed pay plans
• Applying paid time off to the fixed salary
• Bonuses and fluctuating workweek plans
• Overtime pay computations – the “half-time” method
• Control of overtime costs - non-standard schedules and seasonal employment
• How to ensure fixed salary employees are adequately compensated for overtime

It is critical when implementing a guaranteed pay plan that an employer understands the requirements and rules for compliance with the FLSA. These plans do not reduce the need for employers to keep accurate records of hours worked. There are strict requirements for compliance.
 
It is also crucial for employers to know what to avoid. The Department of Labor has identified a number of plans that employers have attempted to use that do not meet the statutory requirements of the FLSA. Such programs include such things as artificial wage rates, split day plans, pseudo bonuses, or a low “regular” rate supplemented by employer-provided “facilities”. Using such plans can be costly to employers in terms of paying back wages and penalties.

• Payroll Supervisors and Personnel
• Payroll Consultants
• Payroll Service Providers
• Public Accountants and Enrolled Agents
• Internal Auditors
• Tax Compliance Officers
• Officers and Managers with Payroll or Tax Compliance Oversight
• Company / Business Owners
• Managers/ Supervisors
• Public Agency Managers
• Audit and Compliance Personnel / Risk Managers

Patrick Haggerty is a tax practitioner, author, and educator. His work experience includes non-profit organization management, banking, manufacturing accounting, and tax practice. He began teaching accounting at the college level in 1988. He is licensed as an Enrolled Agent by the U. S. Treasury to represent taxpayers at all administrative levels of the IRS and is a Certified Management Accountant. He has written numerous articles and a monthly question and answer column for payroll publications. In addition, he regularly develops and presents webinars and presentations on a variety of topics including Payroll tax issues, FLSA compliance, information returns, and accounting.