No doubt you have heard about the Department of Labor’s Final Rule effective Dec. 1, 2016 raising the compensation required to qualify for a “white collar” exemption (executive, administrative, and professional) from $23,660 per year to $47,476 per year. What does that mean? It means that if you have an employee that you consider to be exempt from overtime under a white collar exemption, and he or she makes less than $47,476 per year, you need to act in order to keep the exempt status.
What strategies can you use to comply with the new rule, but minimally impact the bottom line? Here are some suggestions:
• Increase the employee’s salary to the new salary level to retain his or her exempt status (assuming that the duties test is also met); or
• Do nothing, and the employee is now considered non-exempt. This means you are paying overtime – one-and-one-half times the employee’s regular rate of pay for any overtime hours worked; or
• Consider the employee non-exempt and eliminate any overtime hours ( your bottom line stays the same) or
• Consider the employee non-exempt and reduce his or her base salary and add pay to account for overtime hours worked. This way the employee’s salary remains the same.
In calculating what your employee’s salary actually is, you can consider non-discretionary bonuses and incentive pay, including commissions, to satisfy up to 10% of the salary level, according to the final rule.
Review DOL’s Final Rule here.