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Friday, August 15, 2008

Pay Discrepancy

This is a salary rounding question.

A non exempt is hired at a salary rate. The HR system contains an hourly rate since they are non exempt. The employee is given their merit raise of 5%.

The merit raise paperwork they sign has only a percentage raise, say 5% and does not note any hourly or annual rate on it. This paperwork is signed by the employee and their management.

Due to rounding applied to the hourly rate, the employee ends up with a raise of 4.995% (making 36.19 an hour instead of 36.1935) causing a difference of $7 a year due to the effect of rounding on their hourly rate.

Can the employee raise be less than 5% if that is due to mathematical rounding of the hourly dollar rate even though the signed review states they will get a 5% raise?

FYI: there are no written HR policies in regards to how salary rates are to be rounded. They are using standard rounding practices.

Oh for heaven's sake. It's $7 per year. Not $7 per week or month, but $7 per year. By my calculations, with a 40 hour work week and 52 weeks a year, there are 2080 hours in a standard work year. $7/2080 results in a difference of $0.003365 per hour.

Is this the hill you want to die on? Because I'll tell you right now, if you come into HR or your boss with this complaint, whether it's fixed or not you'll have a huge black mark on your official office gossip record.

Oh hush up those of you who are saying HR needs to keep everything confidential. No law against discussing stupidity.

Now on a policy question there are two problems. One, they should never make an offer that states an annual salary for a non-exempt position. The offer should have been stated as an hourly rate. Two, they should always round up. But you should absolutely let this go. It will not help you out in the long run. And as for the $7, give up one Burger and Fries per year and you'll be okay. Unless it's at Five Guys, which in that case I understand your pain.


The Engineer said...

Congratulations! That's great! A 4.995% raise is much better than what I received this year.

Take Evil's advice on this one.

jaded hr rep said...

Yeah, would make employee look like a dork if s/he complained, but this is one of the things I, and most of my HR colleagues, am obsessively detailed about because we know there's always one of these dorks in the company. Boo to the HR staff that didn't catch this.

HR Godess said...

Always, always, always round up. If you were told you were getting $100 and you got $93. You would be upset. Even a penny more is worth it instead of making the company look cheap.

I agree with EHRL - let it go!

Kevin said...

I totally agree as well...I worked for several years in a payroll department and would be contacted because someone was upset that they were salaried (making over a $100k/yr) and their check fluctuated by a penny. Stupidity...and yes...we do talk about you if you are going to be that stupid.

DrinkingTea said...

Was this letter written by someone in HR dealing with this issue or the employee him or herself?

We used to have an employee who was subject to a tiny local tax on the first few thousand dollars of income. Every February, she would call in a lather because her check that week was roughly a dime greater than it was before. At least fifteen minutes would be spent talking her out of her hysterics. She alternated each year between not wanting to pay back taxes at the end of the year and thinking that we stole a few cents from her from the beginning of the year. Even if she had to pay that huge tax back at the end of the year, it would have been easily paid with less than it would take to buy one bag of french fries.

Anonymous said...

Our employees are eligible for an annual 4% merit increase figured on their hourly salary. We use standard rounding, round up for .005 or more, dropping .004 or less. Our employees understand and don't complain because they know ahead of time and it is applied to everyone.

Anonymous said...

Our employees are eligible for an annual 4% merit increase figured on their hourly salary. We use standard rounding, round up for .005 or more, dropping .004 or less. Our employees understand and don't complain because they know ahead of time and it is applied to everyone.

Katherine said...

This is why we always say "you'll be going from to $11.15 an hour to $11.71 an hour. This is about a 5% increase." At least when I have a say.

Although I've worked at my company 7 years, am salaried/exempt and have had my increase given hourly, weekly, bi-weekly, monthly and annually, depending on who wrote up the paper work.

Anonymous said...

They should round up; I have never worked anywhere that didn't. It avoids people feeling cheated. It is not about the 7 dollars, it is about feeling you were treated fairly. We are social creatures and are wired for the desire for fairness. I am not sure if this experiment has been done, but I pretty sure something similar has been. If you were to offer someone money, tell person A that he has a choice, he can take 20 dollars, but if he does Person B (a stranger) will get 27. But if he takes 13, Person B will only get 13 as well. There will be a large number of people that will choose to take the lesser amount and preserve the “fairness”

That said, I totally agree with evil. Its 7$ get over it.

Anonymous said...

I had a client (many) years ago who were in serious union litigation (canada, marine unions) over an employee's pension investment -- being based on an 'annual salary' not the actual hourly payments. The employee had 'to the penny' records of his paychecks going back forever, and calculated that the company had defrauded him out of 14 cents per year for 25 years (yes -- less than 5 bucks Canadian).
The Union rules meant that they had to go forwards with the complaint, since it was 'documented' and va;lid - if appalingly trivial.

I don't know the outcome for sure(unfortunately) - I think they settled out of court.

The moral is: There is no sum so insignificant that it wont piss off someone. So always be generous.