Rules Change Effects Exempt Employees

Rules Change Effects Exempt EmployeesFor small businesses, Department of Labor (DOL) proposed changes to the Fair Labor Standards Act that substantially overhaul overtime pay rules could be the next big compliance challenge. 

The proposed changes more than double the salary threshold that helps determine whether workers are exempt (no overtime) or non-exempt (overtime pay required) when working more than 40 hours per week. If finalized, these changes will make nearly five million workers eligible for overtime pay as early as this year.

Here are a few steps small business owners should take now to prepare:

Ensure compliance with existing rules. Review existing employee classifications to ensure that your “exempt” employees are properly classified under current rules. Figure out which employees meet the administrative, professional, or executive exemption rule and currently earn at least the current minimum of $23,660.

Determine the employees to whom the new rules may apply. Identify those currently-exempt employees who earn less than the proposed minimum of $50,440 per year. Determine how many hours these employees typically work per week over the course of a year, factoring in “peak” periods and other seasonal shifts.

Compare the costs of raising salaries. Weigh the costs of raising those employees’ salaries to meet the proposed exemption criteria against what it would cost to reclassify them as non-exempt and pay them overtime when they work more than 40 hours a week. If an employee’s salary is closer to the current minimum ($23,660) and they rarely work overtime, it might make sense to reclassify them as non-exempt. Conversely, if an employee’s salary is closer to the proposed minimum ($50,440) and they frequently work overtime, you may consider raising their salary to maintain the exemption.

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