Salaried vs. Hourly – A Change is Coming

It’s been talked about since last year, but nothing was concrete.  The Department of Labor (DOL) wants to change how to determine if a person should be considered exempt or non-exempt (salaried or hourly). We now have more information that can affect your business.

Some background first. There is a two-part test to determine if a position should be considered salaried (exempt) or hourly (non-exempt).  The first test is salary.  Only if this test is passed can you proceed to the next step which is based on the actually duties/responsibilities of a position.

The most talked about change is to the Salary test.  Currently, as long as an employee earns $455 per week (or $23,660 per year) they pass the salary test.  The proposal submitted to the Office of Budget Management (part of the process to create the new standard) states an employee must earn a minimum of $917 per week (or $47,475 per year) to pass the salary test.

This is a substantial increase and the proposal is to adjust the salary test every year.  If you would be interested in reading the full proposal, it’s on the DOL website here.

What does this mean to you? If you currently have salaried employees earning less than $47,475 per year you need to determine what your next steps are – raise the salary or make them hourly (and pay overtime). You also need to keep in mind – many people find prestige in being salaried and will not take well to being classified as hourly. This will affect your communications to those affected.

The good news is the rule is not final, when it does become final you will have 60 days to make any necessary changes.

For most of us, 60 days will not be enough time and you will want to start planning and running different scenarios now.

Need assistance in determining the best course of action for you company? Please contact Andrea today to schedule a discussion at [email protected] or call.