August 2025 Iowa Q&A roundup

Q           What are the procedures or laws surrounding switching an employee from salary to hourly, and what benefits must be offered, e.g., holiday pay and paid time off?

There’s no specific procedure for moving employees to hourly status in most cases. Normally we’d suggest you give them prior notice in a letter format—generally 30 days’ notice. It’s important you articulate why they’re being recategorized, especially if there are other employees in the same category you intend to continue to treat as exempt. 

You also want to make sure you’re keeping your categorization clean. In terms of benefits, this depends on state law, any contracts (including union contracts), and policies you may have. From a Fair Labor Standards Act (FLSA) standpoint, if employees are nonexempt, they have to be paid at least minimum wage, you have to pay overtime for hours worked over 40, you have to calculate overtime correctly, and you have to understand what constitutes hours worked. The FLSA doesn’t proscribe benefits or time off.