The United States Fair Labor Standards Act of 1938 requires that employees be provided overtime pay unless they qualify under one of the FLSA exemptions.  On Mayflsa-regs-graphic

  • Increase the minimum weekly salary to $913 ($47,476 annually) to be considered exempt.  The current limit was $455 per week or $23,660 annually.
  • Increase the highly compensated employee exemption total compensation to $134,004. The current threshold is  $100,000.
  • Establish a mechanism for an automatic update of salary limits and thresholds every three years.
  • Amend the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard level.

The effective date of this final rule is December 1, 2016.  Employers need to consider the many issues, decide on a course of action, and then have all programs and documented policies in place by this December date. Failure to be in compliance with the new requirements can result in significant employer liability. The changes outlined in the final rules will likely impact financial results, human resources, and information systems.

Consider the following questions:
1.Which employees will be affected?  Gather lists of employees that are currently classified as exempt and have annual salaries below $47,476.
2.What will your strategy be for those impacted?  Develop alternative strategies for those employees that are impacted.  The DOL website offers a general guide to various strategies.  Evaluate the various strategies and the impact changes will have (i.e. increase pay to the minimum, change status to non-exempt, budgets required to deliver pay increases, etc.)
3.How will these changes affect your employees?  Not all employees will view the changes as positive.  Many companies will need to decide whether supervisors who are changed to non-exempt will maintain managerial responsibilities.  Engaging with your employees to understand their issues and answering questions they may have will be appreciated and beneficial.
4.How will these changes impact your compensation and incentive planning and administration?  Take a look at your current salary structure and job slotting.  Increasing wages for employees in certain salary grades may create compression problems between grades.  Also, look closely at your nondiscretionary incentive and bonus payments to see if the amended salary basis test helps you satisfy the standard salary test.
Given the deadline of December 1 to have your company’s new programs, systems, and policies in place and communicated, consideration should be given to conduct a few mid-year reviews of programs that usually wait until year-end.  Getting a sense in mid-summer of what is working and what is not working can avoid a last-minute rush to renew a program that has early warning signs. Among these programs are:
– Executive annual bonus plans
– Middle management annual bonus plans
– Salesforce incentive plans
Contact Us
Simply reply “Let’s Discuss” to this email if you would like to discuss your FLSA compensation issues or wish assistance with a mid-year review.  Please feel free to contact Tim Weizer at (312) 479-6411 or tim@salescne.com or Neil Lappley at (847) 864-8979 or nlappley@lappley.com.  Please also forward this email to anyone you feel will be interested.
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