Time is Money
As the familiar saying “Time is Money” implies, time and money are interdependent. If one’s time actually is money, then time is an incredibly valuable commodity. Benjamin Franklin is often attributed for the quote and considering our time here is finite, suggested it was better to do things as quickly as possible in both business and finance. After all, if people are capable of working, but are choosing not to, then essentially money is being lost. Wasted time, wasted money…
With the deadline of December 1st quickly on the heels of employers nationwide, the new FLSA overtime rules couldn’t be any more relevant. The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, record keeping, and minor/youth employment standards affecting employees within private organizations and in Federal, State, and local governments. With several states passing an increase in minimum wage during the 2016 Federal Election, along with a final ruling in May 2016 updating and extending overtime regulations affecting over 4 million workers, many American taxpayers will be getting additional funds in their bank accounts sooner than later.
Prior to the final ruling to update the regulations defining overtime exemptions for executive, administrative and professional employees (EAP), since 1940 the Department of Labor’s regulations required meeting all three of the following tests be met for the EAP exemption to apply:
- The salary basis test – the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed.
- The salary level test – the amount of salary paid must meet a minimum specified amount.
- The duties test – the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations.
After months of anxious waiting, the Department of Labor finally published the final rule in the Federal Register containing significant changes for employers with salaried workers. Among the list of changes, the new minimum salary rule has more than doubled the minimum salary required to be exempt from overtime requirements. The last time the department modified the weekly salary level to $455 dollars, $23, 660 annually was in 2004. The new threshold establishes $47, 476 annually, $916 dollars weekly, as the new minimums requirements to be considered exempt from overtime in the EAP employee groups.
The Department of Labor’s final rule also approves a higher annual salary threshold for highly compensated employees (HCE). For employees who regularly perform one or more exempt duties/ responsibilities of an executive, administrative, or professional, the total compensation required has been increased from $100,000 dollars per year to $134, 004. Specifically if reference to exempting HCE’s, an employee must receive at the least the new standard salary amount of $913 per week on a salary or fee basis and pass a minimal duties test.
Not to be left out, incentives, bonuses, and commissions are eligible to satisfy up to 10 percent of the minimum salary requirement for EAP exemptions beginning December 1st, 2016. This new rule is being implemented for the first time and employers may now use these non discretionary bonuses, generally defined in advance, as long as they are paid at least quarterly.
Beginning December 1, 2016 and automatic updating every three thereafter, a couple options exist to prepare and comply with the new rules. The first option is to ensure your exempt employees are properly classified. Employees who receive less than $913 dollars per week are classified as “non-exempt” and paid at least the minimum wage and overtime for every hour worked. Secondarily, if exempt employees are paid less that new minimum, raise their salaries and review their job duties in order to comply and continue to qualify for an exemption.
For more information of the Final Overtime Rule, please visit the Department of Labor’s Wage and Hour Division website here:
By Susan Amsler
November 10, 2016
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