The new “white-collar” exemption rule has been announced. This finalized regulation guarantees a minimum wage for all hours worked during the workweek, and overtime premium pay of not less than one and one-half times the employee’s regular rate of pay for hours worked over 40 in a workweek.
The White House released a fact sheet on May 17, 2016, announcing the changes to 29 CFR 541, the “white-collar” exemption rule.
Summary of Changes
The changes to the white-collar exemption rule were announced by the U.S. Department of Labor on May 18, 2016. They are as follows:
- The minimum salary required for an employee to be eligible for a white-collar overtime exemption has increased from $455 per week, or $23,660 annually, to $913 per week, or $47,476 annually.
- The amount for the minimum salary requirement will automatically update every three years, based on the 40th percentile of full-time salaried workers in the lowest-wage census region.
- The annual compensation required for the highly compensated employee exemption has increased from $100,000 annually to $134,004 annually.
- The amount of salary required for the highly compensated employee exemption will automatically update every three years, based on the 90th percentile of full-time salaried workers nationally.
- Up to 10% of standard salary level can come from non-discretionary bonuses, incentive payments, and commissions, paid at least quarterly.
- No changes were made to the standard duties test.
- The changes will be effective on Dec. 1, 2016.
Next Steps
Between now and Dec. 1, 2016, there are several things that integrators should do to prepare for the changes to the white-collar exemption rule:
- Evaluate your current classifications of exempt employees in light of the salary test and the duties test.
- Evaluate which of your employees may be impacted by the proposed change (exempt employees currently making less than $47,476 and/or employees who do not perform exempt-level work).
- Review your bonus, incentive, and commission plans, if any.
- Review your wage-hour processes and policies, including timekeeping for hourly employees.
- Develop communication plan for reclassified employees, if any.
- Develop new compensation plans for reclassified employees, if any.
- Prepare to train reclassified employees and managers.
How to Get Help
You are not alone. NSCA’s partner, Insperity, is here to help. We diligently monitor these proposed changes and will continue to provide updates as things progress. We are here to support you as you make any necessary transition and to help prepare you along the way. Learn more here. -Insperity
As stated in the Client Service Agreement (CSA), compliance with the FLSA and any similar state law is the client’s responsibility. By providing the information and suggestions contained in this communication, Insperity is not assuming any liability or responsibility for FLSA compliance and is not intending to amend or alter in any way the terms of the CSA. The suggestions and feedback we have provided is based on the information you the client provided to us regarding current job titles and duties of the employees working at your business. Insperity does not warrant or guaranty the accuracy of the information or suggestions contained herein. We recommend that you periodically (at least once a year) review your classifications to confirm that they remain appropriate, especially concerning exempt positions. FLSA classification can be a difficult and inexact process. You may wish to consult with legal counsel experienced in wage and hour law to assist you in fulfilling your responsibilities under the FLSA and CSA.
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