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The DOL has announced that employers need to raise the salary threshold for exempt staff to $35,568 annually, effective January 1, 2020. According to SHRM, more than a million currently exempt workers will need to be reclassified to nonexempt status or their pay will need to be raised above the new threshold. However, nondiscretionary bonuses and incentive payments paid annually or more than once a year may be used to satisfy up to 10% of the standard salary level.
What should you do now?
- Evaluate your 2020 pay structure for any exempt-classified employee earning less than the threshold of $35,568 per year.
- Review budgets and forecast financial implications for potential changes in labor costs.
- Discuss with HR and Legal to guarantee compliance when determining the cost of raising employee salaries above the new threshold against the cost of reclassifying employees as nonexempt and paying overtime.
- Review job descriptions. Does each job description ensure they satisfy the exemption criteria? Make sure they are up to date and accurate.
- Complete an audit to determine exempt status. Remember the exemptions:
- Executive exemption. The employee’s primary duty must be managing the enterprise or a department or subdivision of the enterprise. The employee must customarily and regularly direct the work of at least two employees and have the authority to hire or fire workers (or the employee’s suggestions and recommendations as to hiring, firing, or changing the status of other employees must be given particular weight).
- Administrative exemption. The employee’s primary duty must be office or nonmanual work that is directly related to the management or general business operations of the employer or the employer’s customers. The employee’s primary duty also must include the exercise of discretion and independent judgment with respect to matters of significance.
- Professional exemption. The employee’s primary duty must be work requiring advanced knowledge in a field of science or learning that is customarily acquired by prolonged, specialized, intellectual instruction and study.
- Create a communication strategy should changes need to take place. Be clear why the changes are being made and thoroughly explain the time-keeping system that now applies. Monitor overtime and define expectations and be respectful with questions along the way.
Purple Ink can assist with all aspects of this upcoming law change. Please start to take action now with your finance team to eliminate last minute changes that create disruption where planning ahead could have made this transition a breeze. Reach out to Purple Ink, or to me directly, to discuss how this may affect your workforce.
Laura is a Consultant at Purple Ink. She thrives for all employees to understand their role and value within the company’s mission.