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Hi All,

Just curious as to how some of you code time-sheets when an exempt EE works less than 40? Say for example, Scenario #1: someone works 30 hours in the week, Our system will pro-rate their salary across the 30 hours.

That being said, currently I code unallowable labor to an unallowable labor account (having a company party, or advertising labor, maybe  trade show) for the hours worked on that (Scenario #2: 30 hours working G&A and 10 hours Unallowable). But that got me thinking about how someone could work only 30 and have ALL of their salary prorated to an indirect cost pool with $0 going to Unallowable, where in the other scenario #2 they would have a 30/10 split to G&A and Unallowable. 

So that being said, what do you all do when an Exempt EE works less than 40?

How does your workplace request you code their time-sheets in the above examples? 

Hoping to get a good discussion here, Thanks

 

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12 minutes ago, here_2_help said:

Hours less than 40 are recorded to either Paid Time Off or to Leave Without Pay. No exceptions.

Does your system pro-rate the exempt salary hours to "Leave Without Pay"? If so, what account is LWOP mapped to? (Unallowable or something else?). Also keep in mind this would be for partial day absences, not a full day. So in the 30 hours extreme example they would have worked 5 days, 6 hours each day.

What is your opinion for the DOL for an Exempt EE to be putting LWOP on their timesheet? my concern is that it would appear as if we are deducting from their gross salary, although their actual paycheck and paystub would say otherwise. The idea that they are taking hours "With out pay" seems to go against the exempt deductions from gross pay.

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Funny that this is the exact opposite situation from uncompensated overtime, where employees record more hours than they get paid for. In this case, employees are getting paid for more hours than they are recording.

Yes, exempt employees can get paid for partial work days; that's what "exempt" means with respect to FLSA. However, in my experience timecards for exempt employees must record 40 hours in a week (assuming that's the standard work week for them) regardless of how many hours they actually work. It's not a matter of proration, it's a matter of timekeeping accuracy and labor accounting. Remember, payroll is distributed based on those timecards. Your system appears to let employees avoid recording hours to PTO, which means that you are missing some indirect expenses. Why is the company averse to having an indirect expense for PTO?

Because there is no PTO expense the company seems to be increasing the "cost" of the hours that the employee is actually recording and charging to cost objectives, which might lead to allegations of an inflated direct labor cost.

Re: your LWOP question. The situation is complicated. There are Federal labor laws I'm not going to get into here (and I'm probably not qualified to discuss them). That said, typically an employee takes LWOP when the PTO balance is insufficient to cover time not worked. If an employee is on LWOP then they are actually not getting paid for that time.

So this is, fundamentally, a labor law compliance issue more than a labor accounting issue. You need better advice than you will get here, and I suggest you pay somebody for it.

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rfpro, there are too many variables involved in your question to provide a one size fits all answer.  The time keeping requirements for a company providing office furniture off a GSA schedule could be quite different from a contractor doing work on CAS covered cost reimbursement contracts.  From a contractual perspective, you have to analyze the terms of your contracts and determine if your timekeeping policies meet the requirements of those contracts.  If they do, you are good to go regardless of what another contractor's policies may be.  Remember, the FAR only requires a contractor to have an accounting system, which includes a timekeeping system,  that is adequate for the contract type being performed.  See, FAR 16-104(i).

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Let me give a more detailed scenario (theoretical) , lets forget DOL/FLSA for now:

-Exempt EE has 32 hours of PTO, plenty to use. 

-Exempt EE is scheduled 8-5 (1 hour break, therefore 8 hours work per day)

-Exempt EE has a Docs App from 8-10AM on a monday. Their time-sheet will now have 6, 8, 8, 8, 8 hours for the 5 days of the week. (38 total)

-They don't need to use "PTO" hours for that time because they are exempt and still get paid the full day, so what code should be used to fill the 2 missing hours from Monday? Or, Should I make people use PTO for that time?

Various Outcomes of the above Scenario:

1. If they use 2 hours PTO - the system will put 2 hours of PTO to a Fringe Pool.

2. If they leave it blank (stay with 38) the system will Pro-rate the salary to the items they selected

3. If they use LWOP - the system would pro-rate the salary to the 38 hours same as #2 above.

4. The 4th option I was thinking is a code that would either "Act" the same as PTO (it would lead the labor expense to a fringe pool) OR a code that would act as Unallowable (Lead that labor expense to an unallowable account, because they are being paid a full day but those two hours were not spent working). 

 

 

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47 minutes ago, rfpro said:

so what code should be used to fill the 2 missing hours from Monday?

That is up to you, based on your company policy and the terms of your contracts.  The FAR does not provide for any particular method to address this issue.

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1 hour ago, Retreadfed said:

That is up to you, based on your company policy and the terms of your contracts.  The FAR does not provide for any particular method to address this issue.

Well, in regards to this, in the above situation and for the sake of discussion. What does your company do and how do they treat this, where you work?

Just wondering how other companies approach the opposite situation of the uncompensated overtime (I.e. "overcompensated under-time", is that a thing??) 

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3 hours ago, rfpro said:

-They don't need to use "PTO" hours for that time because they are exempt and still get paid the full day, so what code should be used to fill the 2 missing hours from Monday? Or, Should I make people use PTO for that time?

I have been in this business since Reagan was President. I have had many employers and been a consultant to many, many more companies. I have never, ever, seen a Government contractor permit an exempt employee to avoid using PTO by claiming that they still get paid for the full day, so why should they use PTO when they don't have to? (I have seen Comp Time banks used, but that's not your scenario.) Employees can "make up" time by working OT on other days in the week, but the number of recorded hours in a work week is never less than 40 (alternately never less than 80 in a two-week pay period).

Given your scenario, the impact of the practice of not recording PTO to a Fringe Benefit account is to artificially decrease the Fringe Benefit rate and to increase the cost of the other labor hours. Depending on the labor distribution and contract mix, that practice could be inflating costs charged to certain contracts while decreasing costs charged to other contracts. Maybe; it's not possible to say with any certainty from afar.

If I found a contractor using that practice, I would advise them that their timekeeping system was not adequate for cost-reimbursement or T&M contract types.

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18 hours ago, here_2_help said:

Given your scenario, the impact of the practice of not recording PTO to a Fringe Benefit account is to artificially decrease the Fringe Benefit rate and to increase the cost of the other labor hours. Depending on the labor distribution and contract mix, that practice could be inflating costs charged to certain contracts while decreasing costs charged to other contracts. Maybe; it's not possible to say with any certainty from afar.

If I found a contractor using that practice, I would advise them that their timekeeping system was not adequate for cost-reimbursement or T&M contract types.

I really appreciate your input here! I totally agree with what you are saying and this is pretty much exactly what I have been trying to explain to my company (as far as the labor distribution/proration of cost etc to different contracts at rates, etc.).

What FAR or CAS clause would you use to support the 40 hours recorded time-sheet requirement? Or would you just say the system is not adequate? (i.e. proper segregation of direct and indirect costs?)

 

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15 minutes ago, Retreadfed said:

H2H, why is this system not adequate for T&M contracts?  Maybe I am missing something, but it seems to capture the actual hours worked.

I agree that our system is adequate for T&M , the problem that is concerning is for cost-reimbursement type contracts where the salary can hit contracts at varying hourly rates due to pro ration (if the timesheet is not 40 hours, either under or over 40). 

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21 minutes ago, Retreadfed said:

rfpro, in regard to cost reimbursement contracts, are you talking about employees who perform directly on a contract, employees who perform a function that is charged to an indirect cost pool or both?

We have employees who may perform both indirect and direct in the same period. Their direct time can potentially go to a mix of contract types as well..

80 hours example ($2000 gross pay, Exempt EE, cost rate = $25/hr)

10 hrs Contract A - FFP ($250 Direct Labor)

35 Hrs Contract B - T&M ($875 Direct Labor)

20 Hrs Contract C - Cost Plus ($500 Direct Labor) (This is the one that is in question)

13 Hrs O/H Labor - O/H Pool ($325)

2 Hrs PTO - Fringe Pool ($50)

78 Hours example ($2000 gross pay, Exempt EE, cost rate = $25.64/Hr)

10 hrs Contract A - FFP ($256.4 Direct Labor)

35 Hrs Contract B - T&M ($897.4 Direct Labor)

20 Hrs Contract C - Cost Plus ($512.8 Direct Labor) (This is the one that is in question, the cost here went up)

13 Hrs O/H Labor - O/H Pool ($333.32)

Fringe pool ($0.00) Nothing hits the fringe pool here if the exempt EE does not enter PTO on the timesheet to equate to a 40hr/week or 80hr/Pay Period. 

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2 hours ago, Retreadfed said:

H2H, why is this system not adequate for T&M contracts?  Maybe I am missing something, but it seems to capture the actual hours worked.

Because the timekeeping and labor accounting systems that feed the accounting system are not adequate.

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18 hours ago, here_2_help said:

Because the timekeeping and labor accounting systems that feed the accounting system are not adequate.

Mostly I am curious about this What FAR or CAS clause would you use to support the 40 hours recorded time-sheet requirement? Or would you just say the system is not adequate? (i.e. does not have proper segregation of direct and indirect costs?) 

 

Regarding T&M the system can easily track Time spend and where the hours are. It just seems to be a matter of whether or not to increase direct cost pools or to put the unworked exempt EE costs into Fringe (By means of PTO). 

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7 minutes ago, rfpro said:

Mostly I am curious about this What FAR or CAS clause would you use to support the 40 hours recorded time-sheet requirement? Or would you just say the system is not adequate? (i.e. does not have proper segregation of direct and indirect costs?) 

Thank you, rfpro, for the courteously phrased request for more information. Let me try to amplify.

The interesting thing about timekeeping and labor accounting requirements is that they have, generally, sprung from the minds of DCAA auditors. Most of the control activities in these areas are found in the DCAA Contract Audit Manual and related audit programs, but nowhere else. To my knowledge, nobody has ever challenged DCAA's notions of what constitutes an "adequate" timekeeping and/or labor accounting system.

That said, there are a few rules that might have bearing on this discussion. First, CAS 408 discusses measurement of employee entitlement to "compensated personal absence." In this particular situation, I believe there may be a disconnect in the calculation of the employees' entitlement, since PTO is accruing each period (based on the standard work week, I assume) but the company is telling its employees that they don't actually have to use the PTO if they work less than the standard work week.

Second, DFARS 252.242-7006(c)(9) and (10) are similarly relevant to this discussion. (9) requires "a timekeeping system that identifies employees’ labor by intermediate or final cost objectives," and (10) requires "a labor distribution system that charges direct and indirect labor to the appropriate cost objectives." From what I've seen posted on this thread, an auditor might assert, with reason, that the company does not comply with those requirements, because it allows employees to not report PTO hours (which would be charged to an intermediate cost object) in certain circumstances.

 

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  • 2 months later...
On 9/25/2018 at 10:14 AM, here_2_help said:

Hours less than 40 are recorded to either Paid Time Off or to Leave Without Pay. No exceptions.

Why do you assume that 40 hours must be the basis for salary distribution?  It is easy to imagine someone who works less than 40 hours each week for a salary.

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2 hours ago, rsenn said:

Why do you assume that 40 hours must be the basis for salary distribution?  It is easy to imagine someone who works less than 40 hours each week for a salary.

Because of FLSA requirements regarding overtime.

Look, I'm done discussing this. I've given you my best answers. I am not a labor law attorney and, if you want to discuss FLSA requirements, I suggest you hire one for a consultation. Why don't you do what you want to do and let us all know how it turns out. If DCAA (or the Dept. of Labor) buys off on your practices, you can post here and I will admit I've been wrong!

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23 hours ago, rsenn said:

Why do you assume that 40 hours must be the basis for salary distribution?  It is easy to imagine someone who works less than 40 hours each week for a salary.

If the employees are exempt from the FLSA, the employer can set any number of hours it wants as the standard work week.  I know of some contractors who have a base work week of 45 hours for exempt employees.  Similarly, some employers are cutting the base work week to 35 hours.  

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15 hours ago, Retreadfed said:

Similarly, some employers are cutting the base work week to 35 hours.  

Which government contractors are doing that? Please be specific.

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4 hours ago, here_2_help said:

Which government contractors are doing that? Please be specific.

H2H, note that I did not say that contractors are using a 35 hour work week.  I said "employers" are.  Amazon has done this for some employers.  I think Ben and Jerry's has as well as some tech firms and universities.

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