Strategic Compensation chapter 2 case, page 47

Exempt or Nonexempt

Jane Swift is becoming frustrated with her job as a shift leader at Jones Department Store. She’s worked there for 6 months, and the full-time job has turned into more than full time. Several associates have left the store, and as a result, the past several weeks she has worked 45–50 hours each week. She doesn’t mind working the extra hours; she is just frustrated because she is not getting paid overtime pay.

She asked the store manager, Amy Kostner, about the overtime pay she was due. Amy informed Jane that shift leaders are part of the management team and are classified as exempt under the Fair Labor Standards Act. The store is not required to pay exempt workers overtime pay.

Jane agrees that she is part of the management team. As a shift leader, Jane runs the floor when she is on duty. One of the assistant managers sets the daily schedule of associates each week, but Jane and other shift leaders assign the associates to various work areas as needed. Depending on store traffic, associates need to be moved from stocking shelves and cleaning to cashiering or assisting customers. When not work- ing on such management responsibilities, the shift leaders generally assume the duties of associates by assisting customers and cashiering. Jane reports that she typically spends only a little more than half of her time performing associate duties.

Shift leaders are also involved in managerial decisions. For example, they often sit in on employment interviews and typically are aware of employee terminations before the employee is fired. They also give feedback about the associates to the assistant managers who write the annual performance appraisals.

Just like a manager, Jane makes a lot of decisions during the course of her shift each day. If there is a dispute on a sale price, Jane searches the weekly sales flyer to determine the correct price. If a customer has a return, Jane reviews the transaction and initials it before the cashier can give a refund. However, she does not have complete autonomy in making decisions. For example, if a return is greater than $50.00, an assistant manager or the store manager needs to approve the refund.

But even though she agrees that she is part of the management team, Jane isn’t satisfied with Amy’s answer on her question about pay. If she isn’t eligible for overtime pay, she thinks that she should be paid more. While she is paid at a higher rate than most of the associates, she is not paid nearly as much as the assistant managers. A pay increase or overtime pay would at least make it worthwhile for her to put in the extra hours.

Questions:

2-6.Why did Amy classify the shift leaders as exempt? Are there any advantages to Jones Department Store to having the shift leaders classified as exempt?

2-7.Do you think that the shift leaders are properly classified as exempt? Why or why not?

2-8.What are some factors that Amy should consider when determining whether shift leaders are

exempt or nonexempt?

Page 22 case:

Crunch the numbers!

Calculating the Costs of Increasing the Total Compensation Budget at Butcher Enterprises

Butcher Enterprises has experienced substantial employee turnover among its office workers. During exit interviews, more than 80 percent stated that low pay was the top reason for resigning. The company con- ducted a survey of local companies’ pay practices to confirm whether this concern is valid. Indeed, Butcher Enterprises’ average hourly pay rate for total compensation falls well below the market. The compensation survey showed an average hourly rate of $23 for total compensation. Of this amount, wages are $16 per hour and benefits are $7 per hour. In comparison, Butcher Enterprises spends an average hourly rate of $19 for total compensation. Of this amount, 70 percent is allocated for wages.

Questions:

1-7. On an average hourly basis, how much does Butcher Enterprises spend on wages and benefits, respectively, in dollars?

1-8. How much does the company spend on wages and benefits over the course of one year for 100 office workers? Assume that each worker provides 2,080 hours of service each year.

1-9. How much additional money does the company need to match the market rates for this group of 100 employees?