Beginning on December 1st, the adjusted salary threshold will be $47,476, again, provided that their position meets a salary basis and duties test. Given the significant amount of the adjustment, most businesses will be affected and should begin strategizing on potential solutions for compliance later this year.
By Heidi Johnson 6/9/2016
On May 18th the Department of Labor announced the much anticipated changes to regulations within the Fair Labor Standards Act (FLSA), which essentially governs rules surrounding compensation, including when employees are eligible for overtime (hours in excess of 40 during a given work week). The new changes that will impact all businesses as of December 1st of this year relate to the salary threshold for employees to keep their exempt (salary) status. Since 2004, the salary threshold has been $23,660 for an employee to be exempt from overtime, provided their position meets a salary basis and duties test. Beginning on December 1st, the adjusted salary threshold will be $47,476, again, provided that their position meets a salary basis and duties test. Given the significant amount of the adjustment, most businesses will be affected and should begin strategizing on potential solutions for compliance later this year.
The good news? You do have options to consider over the next six months.
If you have employees earning compensation close to the new salary threshold of $47,476 adjusting their salary to this amount, or just over if overtime is a regular occurrence, is an option. Keep in mind that bonus or commission earnings can contribute another 10% to the threshold.
Employers can continue to pay employees their current compensation, and pay overtime when required. If there are particular positions falling below the new salary threshold that regularly work hours in excess of 40 per week, begin to examine those hours now to determine the most cost effective and fair way to compensate following the compliance deadline. Restricting the amount of overtime employees are given is also an option.
The changes could also impact flexible work arrangements for employers or employees; working outside of normal business hours (telecommuting in the evenings and during weekends in addition to regular work hours) will be counted towards the calculation of overtime. Getting prepared to potential restrictions in this arena should be considered and evaluated.
The truth is, there isn’t a ‘one size fits all’ solution for employers. Your business is unique, and the solution that works well for you may not be applicable to the company next door. Take time to strategize with your HR Business partner and put together a plan for compliance that makes sense for you and your employees.