It’s tempting to pay an employee on a salary basis, because payroll expenses are more predictable from month to month. Some employees may request it, for the same reason. However, it is critical that you properly categorize your employees, because misclassification of an employee can lead to claims of unpaid overtime wages and other liability.

5 Steps to ensure you have properly classified all positions:

  1. Review the Industrial Welfare Commission wage order for your particular industry
  2. For exempt employees, ensure that the employee is earning a monthly salary at least twice the current state minimum wage for full-time employment, defined as 40 hours per week.
  3. Evaluate whether the employee meets the “duties test” for an executive, professional, or administrative exemption.
  4. Evaluate whether there are any exceptions (is the employee employed by the State or local government? Is the employee a parent, spouse, child, or legally adopted child of the employer?)
  5. Unfortunately, it’s not always clear. If necessary, consult an employment lawyer.