What is a Reasonable Relationship Package?

What is a “reasonable relationship?” No, we’re not talking about a healthy and mature relationship with your significant other. In the workplace, a reasonable relationship can mean a few different things. It may be the relationship between your guaranteed salary and what you’re actually being paid. It may also mean the relationship between you and your company. Let’s break the term down further.

A quick refresher on wages and statuses

The Fair Labor Standards Act (FLSA) governs many jobs, but some jobs are excluded from FLSA according to specific statutes. A job might be governed by the FLSA, but is considered “exempt” from the rules regarding overtime. Exempt employees are not entitled to overtime pay, while nonexempt employees are. Exempt or nonexempt status depends on how much you’re paid, how you’re paid, and the work you do.

The reasonable relationship that we’ll discuss applies to exempt employees who are paid on a salary basis.

The reasonable relationship for pay

So, if you’re an exempt employee who has a guaranteed salary, the salary amount is probably slightly different from what you’re actually earning. But how large is that difference in expected pay and actual pay? At what point does that difference become a problem?

The golden number is 1.5

The Department of Labor (DOL) issued Opinion Letter FLSA 2018-25 in November 2018 to clear up the issue for an engineering firm. Exempt employees in this firm were guaranteed a weekly salary of $2,100, based on an hourly rate of $70 per hour, 30 hours a week minimum. Employees who worked over 30 hours a week were paid at $70 per hour, so their average weekly compensation ranged from lower than the guaranteed amount to much higher: $1,793 to $3,761. The engineering firm did not want to violate the FLSA’s salary basis requirement, nor cause employees to lose their exempt status.

In response, the Opinion Letter stated that a “reasonable relationship” must exist between that guaranteed salary amount and the amount actually earned by an employee. For a reasonable relationship to exist between the two, an employee’s actual earnings may not exceed 1.5 times the guaranteed weekly salary. This relationship allows employees to meet salary basis requirements put in place by the FLSA.

For example, an employee might be guaranteed a weekly salary of $500. This employee typically earns $600 to $750 in actuality. Since the ratio of $750 a week to $500 a week is 1.5 to 1, this is considered a reasonable relationship.

What if your company has fluctuating periods of slow business or busy seasons? That means an employee’s hours and earnings might be drastically different from week to week. In that case, the DOL Opinion Letter says, averaging an employee’s actual weekly earnings over an annual period can be used to calculate usual earnings to determine a reasonable relationship.

What a reasonable relationship means for employers

If you guarantee a certain salary to exempt employees whose actual compensation is based on hours worked, per diem, or shift length, keep the reasonable relationship formula in mind. This reasonable relationship test protects an employee’s exempt status. It also provides compensation guidelines for employers; if an employee’s ratio of guaranteed salary and actual weekly earnings are skewed, it’s worth looking into their pay rate or schedule to see if adjustments are needed.

A reasonable relationship package in the workplace

Now that we’ve covered what a reasonable relationship technically means according to the Department of Labor, let’s talk about another kind of relationship in the workplace: the relationship between an employee and their organization. Also called “employee relations,” this relationship is key to keeping employees happy, loyal, and engaged with their work. A reasonable relationship package encompasses many human resources policies: good management practices, appropriate workplace behavior, benefits and compensation, schedules, and so on.

As an HR representative, it’s important that you work to implement positive relationships between employees and the overall organization. You might do this, or there may be a dedicated employee relations manager in every department or team.

Maintaining good relationships

To encourage good employee relationships, an employee relations manager or an HR rep may act as a liaison or intermediary between employees and managers. That doesn’t necessarily mean you’re just there to mediate disputes or solve conflicts, though. An employee who may simply have questions may feel more comfortable going to an HR rep or employee relations manager, rather than their supervisor or upper level management.

Creating a better work environment

Managing employee relations also means creating a better work environment for everyone. That might include building or advising on the creation of policies such as:

  • Fair compensation
  • Reasonable work schedules
  • Appropriate benefits
  • Work-life balance goals
  • Conflict management
  • Harassment and discrimination
  • Expected work behavior

Seeking and inputting feedback on employee issues like these shouldn’t just be limited to HR reps or employee relations managers. It’s important to ask for feedback from employees themselves, too. When making decisions on policies that affect the entire company, don’t forget to consider the opinions of those within the company. That’s part of building reasonable relationships within your organization.

Reasonable relationships should be standard

Be sure to review your exempt employees’ compensation for reasonable relationships, and spend some time evaluating the work environment and policies. Ensuring that your organization has happy employees and healthy relationships is hard work. However, it’s necessary in building a company that has both a positive culture and fair, consistent practices.