You probably know that the new salary threshold for the “white collar” exemption to overtime eligibility is going up (to $47,476) in a few months. But here is why just paying more than $47,476 per year may not solve your overtime issues:
- Exempt employees must be paid on a true salary basis – meaning their fixed salaries are not subject to reduction for variations in the quality or quantity of their work.
- Is the compensation at least $913 per week?
- Is at least 90% fixed salary (no more than 10% in bonus payments)?
- If you’re counting bonus payments, are the payments contractual (versus discretionary)?
- If you’re counting bonus payments, are they paid at least quarterly?
- Are your exempt employees’ primary duties truly “executive,” “administrative” or “professional”?
Where you come out on these questions may impact whether you’re “solving” your overtime situation with a salary increase. If it’s only a partial overtime risk reduction, it may be necessary to track hours in any case, and in the end it may be best to just treat the employees as hourly. Another option may be to continue to pay employees on a salaried basis, but treat them as non-exempt and pay overtime on excess hours.
Now is a good time to review and re-evaluate your job descriptions and confirm employees’ actual duties satisfy the “duties” test. It is not enough for an employee to have a job title that sounds exempt; he or she must actually be performing duties that qualify for the exemption.
There are many factors to consider, including how many hours employees actually work, morale of those who may be reclassified, timekeeping requirements, unauthorized overtime, and future increases in the salary threshold. It will be important to continue to monitor job classifications and actual duties and to be consistent in how workers in similar jobs are treated as you move forward.