By Laura Melville
Under current regulations, employees are exempt from overtime pay if they meet three criteria: the employee must be salaried, perform executive, administrative or professional duties, and earn more than $455 per week, or $23,660 per year. The current salary threshold was enacted in 2004.
But that salary threshold could be increasing, as the U.S. Department of Labor last year recommended raising the salary criteria to $913 per week, or $47,476 per year. (The rule was scheduled to take effect Dec. 1, 2016, but a federal judge in November issued a preliminary injunction; the DOL is appealing.) In order to prevent the salary level requirements from again becoming outdated, the DOL proposes to automatically update the salary and compensation levels every three years.
What can employers do proactively?
1. Review the job duties (not titles) of each employee in the impacted salary range. Make sure all job descriptions are up to date and determine which employees qualify for exemption and which don’t. If you are unsure, it’s crucial to seek the advice of an expert, as rules vary state by state.
2. Consider investing in time-tracking software. For positions that would no longer fall under the “exempt” status, it is extremely important to track how long, when and where those employees are working. There are many time-tracking software programs available that are designed to integrate with accounting and payroll software, creating a single interface that can be used by all departments.
3. Know your options. If an employee meets the criteria of being salaried and professional, it may make sense to increase his or her salary to the new level, to retain the exempt status. Employers can also reduce or eliminate overtime hours. Lastly, employers can pay the overtime premium of one and one-half times the regular rate of pay, for any overtime hours worked.
The future of this change is still unknown. In the meantime, continue to work with your trusted advisors to stay on top of the latest developments. With proper preparation, you can be ready and compliant, should the changes come.
Laura Melville is an outsourced accounting supervisor at Wiss & Company LLP. If you would like to get in contact with Laura, you may reach her at firstname.lastname@example.org or at 973.994.9400.