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June 13th, 2016 / by Mike Cooney

Exempt or Non-Exempt? That is the question

The Department of Labor released their much-anticipated changes to the FLSA overtime exemption rules last month. If you didn’t catch the changes that are coming, then here are the basics of what managers need to know now.

What’s changing and when?

  1. This latest change updates the minimum salary level required for exemption from $23,660 annually to $47,476.
  2. Allows for a portion of bonuses, incentives and commissions to be counted toward (up to 10%) the minimum salary requirements, provided bonuses are paid on a quarterly or more frequent basis.
  3. Sets total annual compensation for highly compensated employees subject to minimal duties test (link) at 134,004.
  4. Changes are to be in place by December 1st, 2016 to be in compliance.
  5. Establishes a mechanism for automatically updating salary and compensation levels every three years beginning in 2020.

 

What doesn’t change?

  1. The duties test for exemption. The same exemptions definitions are in place
  2. Employers will still need to make sure that the work meets the exemptions in addition to the new minimum salary level of $47,476 to be classified as exempt.

 

What does this mean?

  1. Employers will want to make sure any employees classified as exempt making between $23,660 to $47,475 are either converted back to non-exempt hourly employees or have their salaries raised above $47,746 prior to December 1st, 2016.
  2. Conduct staffing review and analysis to determine whether it is more cost effective to increase pay to keep employees exempt (if they still meet the exemption criteria) or reclassify them as non-exempt and pay the overtime.
  3. The more managers are able to help affected employees see the positives in these changes, the more likely the changes will go smoothly with minimal impact to morale.