New FLSA Overtime Regulations May Require Revising Your Pay Structure

 Posted on October 25, 2016 in Wage Law

If you have owned your business for any reasonable length of time, you have probably had to deal with some of the complexities of hiring a staff and compensating your workers in accordance with local, state, and federal regulations. Many of your employees—including many frontline customer-facing workers—are probably paid by the hour and are eligible to be paid overtime for every hour over 40 per week. Others, however—including management and other designated positions—may be exempt from federal overtime requirements, meaning they earn a specific salary per year.

Employers whose staff includes exempt employees must be prepared for upcoming changes set forth by the Obama administration and the Department of Labor. The regulations were announced this past spring and are set to take effect on December 1, 2016.

Criteria for Exempt Status

In order for you to consider an employer to be exempt from the overtime requirements contained in the Fair Labor Standards Act, there are certain criteria that must be met. An exempt employee must:

• Be paid a predetermined, set salary that cannot be reduced based on quality or quantity of work performed—known as the "salary basis test;"
• Be paid at salary that is at or above the minimum amount specified by federal regulations—known as the "salary level test;" and
• Perform primary duties of an executive, administrative, or professional nature, as indicated in the FLSA—known as the "duties test."

Amending the Salary Level Test

Currently, the minimum salary for an exempt employee is $455 per week, equivalent to $23,660 per year. Assuming a 40-hour work week, an exempt employee making the minimum allowed salary earns roughly $11.38 per hour, and the exempt status means that he or she may be asked to work more without additional compensation. Beginning December 1, the minimum salary for an exempt employee will be more than doubled to $913 per week, or $47,476 per year, making the hourly rate in a 40-hour week about $22.83 per hour.

What Can You Do?

As an employer with exempt employees making below the minimum salary, you will have several options for complying with the new regulations. You may consider:

• Raising the salary of your exempt employees to meet the new requirements;
• Reclassifying your employees as non-exempt and paying overtime for time worked over 40 hours per week; or
• Reclassifying your employees as non-exempt and recalculating their salaries to include expected overtime hours.

Seek Legal Guidance

As with any changes to the law, new compensation regulations can cause major headaches for business-owners and employers. That is why it is important to work closely with an experienced employment law attorney in Schaumburg. Call The Miller Law Firm, P.C., at 847-995-1205 to speak with a lawyer who will help your company maintain full compliance with the new requirements while protecting your bottom line.

Sources:

https://www.dol.gov/whd/overtime/final2016/overtime-factsheet.htm

http://www.lexology.com/library/detail.aspx?g=50d56525-ba39-4ec0-a5ed-076a1bffe7bd