4 Things Businesses Can Do to Prepare for Increase in Exempt Salary Level

From Precision Payroll of America, LLC:

Critical Salary Level Proposal

The Department of Labor (DOL) recently issued a proposed rule to increase the minimum salary requirements under the Fair Labor Standards Act (FLSA) for salaried exempt employees. This would require that ALL exempt employees be paid no less than $50,440 annually starting in 2016—almost doubling the current minimum of $23,660.

The proposed rule would also increase the minimum salary for Highly Compensated Employees to 90% of the national earnings of full-time salaried workers ($122,148 annually in 2016). These numbers will go up annually in the future by a percentage. So, this is not a one-time change; these minimum salary thresholds will continue to increase each year.

“The President specifically mandated that the DOL raise the minimum salary level, but few anticipated that the number would be this high,” says Leslie Day, Precision Payroll’s Director of HR Consulting. She notes that this new exempt salary threshold was created by marking a ‘line in the sand’ at 40% of the average national earnings level for full-time exempt employees. The DOL has stated that this new salary level is an intentional attempt to force 40% of the exempt workforce toward a classification change to non-exempt status, where the employees must be paid for overtime.

What can businesses do now to prepare?

  1. Identify how many of your current salaried employees will be affected by this new rule – those paid below $50,440.
  2. Assess how many hours beyond 40 (or which are eligible for overtime) your current salaried exempt employees impacted under the proposed threshold (salary less than $50,440) are working. This will be an individual-by-individual assessment.
  3. Decide if a salary increase for some or all of those not currently meeting the salary requirements is a plausible financial decision and the best solution for your business.
  4. Decide if it would be better that some or all of the positions be reclassified as salaried non-exempt, with the employees then being entitled to overtime pay if they work overtime hours.

For more information please visit: http://www.precisionpayroll.com/critical-salary-level-proposal/

Similar Posts