Payday Payroll – Final FLSA White Collar Exemption Rules Announced
As you may have heard the Department of Labor (DOL) has released its final ruling on the new salary threshold for certain employees to qualify as exempt from minimum wage and overtime under the Fair Labor Standards Act’s (FLSA) white collar exemption.
Anne-Lise Gere SPHR, of Gere Consulting has provided Payday with highlights (in plain English) of the new rulings. For more information please visit her website at www.gereconsulting.com or the DOL website. Anne-Lise will be making her Step-by-Step implementation guide, “Overtime Ready”, available soon.
Here are the key points from the Department of Labor (DOL):
1. The salary level Increases to $913 per week for white collar exemption. Currently, to qualify as exempt, employees must make more than $455/week or $23,660/year. The DOL has announced that the salary threshold will be increased to $913/week or $47,476/year. While the change applies to all industries, it will disproportionately impact the nonprofit, government, service-sector industries, and regions where wages are traditionally lower.
2. The salary level Increases to $134,004 per year for Highly Compensated Employees (HCE). Currently, the HCE exemption is set at $100,000.
3. The Effective Date Is December 1, 2016. Employers have five months to comply with the final rule. Considering the impact of the changes, it’s just enough time to adapt to the changes and shape your workforce.
4. For the first time, the DOL includes an automatic updating of the salary levels every three years. DOL wants to provide predictability and more graduated salary changes for employers.
5. Bonus and incentive pay can be included to meet the salary test. However, those are capped at 10% of the total salary. In other words, about $4,750 can be included in nondiscretionary bonuses and incentive payments (including commissions) to meet the new salary test.
6. No change to the duties test. The existing job duty requirements to qualify for Executive, Administrative and Professional exemptions remain the same.