Breaking News - May 18, 2016
On May 18, 2016 the Department of Labor announced the new salary threshold for certain employees to qualify as exempt from minimum wage and overtime under the Fair Labor Standards Act’s White Collar Exemptions.
Effective December 1, 2016, the new minimum salary level will be $47,476 per year ($913 per week). This is a significant increase from the current level of $26,660 per year ($455 per week). Up to 10% of this income may come in the form of non-discretionary bonuses, incentive pay, or commissions, as long as that portion of the compensation is paid at least quarterly. In the event that an employee does not earn enough in bonuses and commissions to meet the full minimum salary requirement, a catch-up payment can be made by the employer once a quarter.
The minimum salary requirement applies to all white collar workers who are classified as exempt executive or administrative employees, and to many who are classified as exempt professional employees. As anticipated, the duties tests for the White Collar Exemptions have not changed.
Most of these exemptions require that the job pass a three-part test
1. Duties: The employee has to do specific things regularly, such as use independent judgement or manage at least two people. Each exemption has its own duties test.
2. Salary level: A minimum salary must be earned; currently $23,660, but the new ruling will raise this threshold to $47,476 as of December 1, 2016.
3. Salary basis: The employee is paid the same each week regardless of hours worked or the quantity or quality of their work.
If an employee meets all of the criteria under at least one of the FLSA’s exemptions, the employee qualifies as “exempt” and is not eligible for overtime pay. If the employee does not meet all of the criteria under one of these specific exemptions, they must be classified as “non-exempt,” and given overtime pay when applicable.
Under the new rules, this salary threshold will increase every three years. It will be set at the 40th percentile of weekly earnings among full-time salaried (not necessarily exempt) employees in the country’s lowest income region – currently the South. It is expected that the next change, which will be effective January 1, 2020, will increase the minimum salary to approximately $51,168.
The new rule also increases the minimum salary threshold for the Highly Compensated Employee (HCE) exemption from $100,000 per year to $134,004 per year. This exemption can be used when an employee carries out a limited number of executive, administrative, or professional duties, but is very well-compensated. The new rule sets the HCE threshold at the 90th percentile of all full-time salaried workers nationally. This number will also increase every three years, and is expected to rise to approximately $147,524 on January 1, 2020.
We have prepared a guide to assist employers in complying with the new minimum salary threshold. This step by step guide will assist you in identifying affected employees and provides strategies to consider when making decisions regarding your employees.
Proper record keeping and documentation is vital, along with a time and attendance system that integrates with payroll and other business functions. Employers need a comprehensive system that will document these important FLSA changes. Platinum Group offers a Payroll and HCM maintain documentation, have easy data management and reports to prove your compliance. It can also be utilized as a stand alone timekeeping system or fully integrated into our HCM platform.
Platinum Group is a full service human capital management (HCM) resource that allows businesses to manage their payroll, benefits compliance, track time and attendance and other various human resources functions in a way that maximizes efficiency and eliminates redundancies with the platform, iSolved. For more information about Platinum Group or to schedule a demo of iSolved please visit our website.