New rules raise the minimum salary for exempt (exempt from overtime) employees from $23,660 to $47,476. The previous rate of $455/week, or $23,660/year has not been a challenge for most employers, but the new rate ($913/week) may cause pause.
You have options! First, conduct a self-audit of your exempt and non-exempt classifications to understand the salary and duties tests for Executive (Management), Administrative, Professional, and other exempt classifications (DOL Fact Sheets #17A & #17G.) Misclassifying an employee can result in stiff penalties so owners and managers should understand their risk. Job titles do not determine exempt status so calling someone a “manager” does not automatically exempt them from overtime.
Second, raise their salary to $913 per week OR convert them to hourly. If you convert them to hourly, decide whether you will take their current salary divided by 40 hours per week or, if they regularly work 50 hours per week, you will calculate the hourly rate that will have the same results as their current salary. Option one may result in higher wages due to overtime. Option two may result in employee dissatisfaction. Thoroughly analyze your compensation, benefit and communication strategies for dealing with this change. Preparation, compliance, and transparent communication will ensure a smooth transition. Partnering with an HR Consultant wouldn’t hurt either!
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