A Critique of Salary

Articles about business are often full of jargon, ugliness, and imprecision, but I recently discovered an article on salaries that seems to avoid egregious examples of those linguistic evils. I had been looking into the origin of the term “salary” and the bureaucratic inventions based on it: “salaried exempt” and “salaried non-exempt.”

I’m a software engineer, and like most of the people who work on software, I am paid according to the “salaried exempt” rules. This is like a normal salary (I am paid a certain amount of money over the course of the year for my work, rather than per hour), except that my company is not required to pay me if I need to work extra hours to get my job done. Not all companies don’t abuse this policy, and my own actually provides some extra money to a point for overtime. Nevertheless, I have some critical thoughts of the entire concept of salary.

I’m not writing this to just summarize my thoughts on salary, but to compare and contrast them with the article I mentioned, which is titled “4 reasons why companies can ask their employees to work for ‘free'”. Lack of capitalization aside, I already have some problems with this. I’m not interested in why a company can ask their employees to work for free. The answer is intuitively obvious: it’s legal. The author talks about the legality of salaried employees being asked to work extra hours, so at least she covers the title. However, out of her four sections, only half talk about why employers can do this. The other half talk about why they would choose to.

A leaked Urban Outfitters memo from 2015 was the motivation for the article, itself written two years ago. It begins (emphasis mine):

The leaked Urban Outfitters memo asking salaried employees to volunteer one or more weekend shifts at an Urban Outfitters fulfillment center to pick, pack and ship merchandise is really no story at all, despite Internet shaming and sensational claims that Urban Outfitters is making management employees work for “free.”  The request of Urban Outfitters is not unusual; it is just unusual that the request was leaked to the media.  Employers regularly require exempt employees to go over and above a 40-hour work week without additional pay, and this approach is appropriate under wage-hour laws.

My disagreement with the article begins with the first paragraph. We’ll come back to the use of the word “free”, used to describe the hours worked by many salaried employees beyond the contractual obligation they have, and focus for now on the line “this approach is appropriate”. Why is it appropriate? Because it is legal. This is the theme of the article. The salary system in place is legitimate because it is legal, which is almost a tautology. The fact is, I don’t think there are many good reasons to have this system, and I think a lot of people realize that and appeal to the legality of it as justification.

And, while some media commentators have dubbed this as “working for free,” the reality is that the employees are not working for free.  They have agreed to work all required hours in exchange for a certain salary.

This is true, but the “required hours” amount to forty hours every week. What value is an agreement to work forty hours a week if this number is merely a suggestion?

After all, remember that there are salary requirements for exempt employees, so those who are being asked to “volunteer” are being compensated at a higher pay grade, at or above a salary set by our federal and state governments pursuant to public policy considerations.  Therefore, it is in fact “fair” to ask exempt employees for the extra work…

“Fair” in the context of this government means “legal”. It is constantly the reference point for fairness and appropriateness. I think it’s a bad standard though; why is the law written as it is written? The real question is what objectively determines fairness. The author tries to answer this by saying the quantity of money being paid justifies overtime. The salary for exempt employees exceeds an arbitrary government limit in the Fair Labor Standards Act, and is thus “fair”. After another reference to the law, she goes on again to give more rationale:

 The increased responsibility and salary levels of exempt employees also means they likely have more bargaining power in the marketplace and freedom to leave an oppressive employer, so government is less concerned about extra “unpaid” work in their case.

I don’t care what the government is concerned with. I don’t care what the government permits under law. I think it is wrong to require employees to work more hours than they are contractually obligated to work, and I’m convinced the entire concept of “salaried exempt” is absurd. The fact I have “more bargaining power” doesn’t offset this, and it turns out that many salaried exempt positions require such specialized skills that this bargaining is done by more people for fewer jobs anyway.

 1. Employees who are exempt can work over 40 hours without additional compensation.

Her first argument is a restating of the law. Of course employees can be required to work over forty hours without additional pay. We’ve already established this. But the interesting question is why this ought to be the case. Yet another attempt to rationalize this is provided:

Exempt employees take customers to dinner after hours without additional compensation.  They answer after-hour calls and emails without additional compensation.  This happens all the time.  And, it’s legal.

Employees often do things after work hours for which they are not paid and it is legal, so therefore companies can ask employees to work more than forty hours a week. It’s not really an argument, but a restating.

2. Volunteering for additional work does not change the employee’s primary duty.

Exempt employees who “volunteer” for  production type duties (e.g. pick, pack, and ship merchandise) do not have their jobs transformed into hourly non-exempt jobs as long as their primary duty remains exempt.

Again, another restating of the fact that companies can do what we’ve already established they can legally do. It gets a little more interesting after this:

3. Production work doubles as leadership training for exempt workers.

…Rolling up their sleeves to help might provide a real eye-opening education for how hard the hourly employees work and how decisions by exempt  personnel affect those hourly workers.  This could be valuable training for managers, administrators and professionals.  Also, isn’t rolling up your sleeves to perform “undesirable” tasks one definition of leadership?  Leaders should not be above any task, no matter how “menial.”

It isn’t doing undesirable tasks that repulses people from the concept of “salaried exempt”. It’s doing those tasks without getting paid for the extra hours worked. This rationale doesn’t even enter into the discussion when the jobs in question are in world of engineering, since there often isn’t any sort of “leadership” in the sense described here going on.

The fact is, we are no closer to answer as to why this is a good practice than we were when we started. One final reason is given:

4. ‘Volunteer’ work can reduce overtime.

Reducing overtime of hourly workers by asking exempt employees to pitch in, as long as the company does it legally, is a perfectly legitimate business decision.

Some people – who don’t get paid extra for working extra hours – can work in place of those who do get paid extra for working extra hours, which if done legally, is a legitimate business decision. Because, as we’ve already seen many times, it is the legality of the practice that makes it fair, legitimate, and appropriate. Overtime doesn’t reduce overtime, even if it means the business isn’t required to pay as much if they shift the employees working overtime around.

My response to all of this is pretty straightforward. An employee who agrees to a contract to work forty hours each week and then proceeds to do just that for $50,000 a year is making $50,000 / (52 * 40) ≈ $24 dollars an hour. Another employee who agrees to the same contract but who is asked to work evenings and weekends, averaging 50 hours of work a week is making $50,000 / (52 * 50) ≈ $19 an hour. This makes sense; 25% more hours worked for the same amount of money means a corresponding decrease in hourly pay.

A government or business can come along and say “we’re paying you for a certain amount of work, not a certain number of hours”, but this isn’t entirely accurate. If it were, an employee could leave the office after getting their work done. This rarely happens for “salary exempt” employees. It’s more accurate to say that “salary exempt” means working a minimum of forty hours a week and a maximum of whatever the managers of the company ask them to work.

While I don’t think the law is wrong to permit what it does, I think people should be a bit wiser than merely repeating what the law says to justify the behavior of companies. I understand that overtime is sometimes required. Companies can’t anticipate everything that might get in the way of an important deadline, and sometimes there isn’t time to hire and teach new employees (who would need to be laid off once the deadline is achieved anyway). This is fine and even fair as an emergency tactic, but it is a terrible policy for normal work.

I’ve often seen companies require employees to work extra hours to avoid hiring new employees, even though the employees working overtime were hired under the pretense of working forty hours a week. It might be legal, but it isn’t fair. I don’t think the government should come and sue the companies doing this sort of thing, but the employees working the mandatory overtime should probably look for jobs elsewhere. The market has already begun correcting this abuse, and companies are even advertising their commitment to a forty hour workweek as a perk.

Medieval peasants worked fewer hours than we wealthy Americans do, and it’s probably part of the cause of our moral decay as a civilization that we give so little time to genuine rest. Companies expect their employees to give up anything to get their jobs done when it turns out that many of the things employees give up are more valuable than the work.