> Are you ready to pay overtime for employees earning less than $47,500?
> Are your professional employees aware that they might lose their exempt status before 2016 is over?
If you answer “No” to these questions, it’s time to pay attention!
Time to get Overtime Ready, the step-by-step workbook to the new FLSA regulations affecting overtime pay and exemption.
Starting December 1st 2016, the salary level for exemption from overtime increases from $23,660 to $47,476. This is the major change. To read about the full ruling from DOL, read this article .
So far, few employers have taken steps to address what this increase in the exemption salary threshold will mean for their workforce and their budget.
It is time to identify the “at-risk” exempt employees in your workforce. Those are the professional and administrative employees who currently earn less than $47,500. They are at risk of losing their exemption status.
The 3-part test for exemption
To be exempt from overtime pay, employees have to meet a 3-part test:
- Paid on a salary basis – The employee is paid the same amount least every month,
- Duties – The work performed meets the exemption requirements for administrative, professional, executive, IT or creative professional. Those are often referred as the “white collar” exemption; and
- Earning – The employee earns more than the salary threshold which is changing with the new rule.
So if an exempt employee earns less than $47,476, he/she will no longer meet the earning test of exemption and the employee must be reclassified as non-exempt.
What’s the big deal about reclassification as non-exempt?
For one thing, exempt employees enjoy their status as management. They might consider their reclassification as a demotion, even if their job duties don’t change.
For another, those newly non-exempt employees will have to get used to clocking in and out, or at least record all hours worked including answering after-hours phone calls and short email from mobile devices.
More importantly, this means the newly non-exempt will now qualify for overtime pay whenever they work more than 40 hours a week.
> How many overtime hours a week these “at risk” exempts work each week?
> How much this currently unpaid overtime could cost your organization?
If you don’t know, it’s time take action.
- Collect hours worked
- Consider assess the financial impact of the new rule on your budget.
Sounds overwhelming? Don’t know where to start? Help is available.