The Department of Labor's new Fair Labor Standards Act (FLSA) rules will raise the salary threshold to $35,568 annually ($684 a week) from $23,660 ($455 a week). The new rates are effective January 1, 2020.
Here are details:
* Non-discretionary bonuses and incentive payments, including commissions paid annually or more frequently may be applied to satisfy up to 10 percent of the standard salary level.
* The new rule raises the highly compensated threshold from $100,000 to $107,432 annually.
* For the FLSA's executive, administrative and professional exemptions, employees must perform specified duties and earn at least the salary threshold. Highly compensated employees are eligible for exempt status if they meet a reduced duties test: (1) The employee's primary duties must be office or non-manual work; and (2) they must customarily and regularly perform at least one of the bonafide exempt duties of an executive, administrative, or professional employee.
The "duties tests" for exemption remain the same.
What to do now?
* Gather information for exempt workers now earning below the threshold.
* Review positions and employees below the threshold and determine how to best manage proposed changes--that is, whether pay levels need to be increased if positions meet the duties test or whether positions should be classified as non-exempt and be eligible for overtime pay. The costs of these choices have immediate and longer-term organizational implications. In addition, employers should consider other key factors that affect employee perceptions of work and status and overall morale.
Various criteria apply to white-collar exemptions:
* Executive: Primary duties must be managing the enterprise or a department or subdivision of the company. The employee must customarily and regularly direct the work of at least two employees and have the authority to hire and fire or substantively recommend such actions.
* Administrative: Primary duties must be office or non-manual work directly related to the management or general business operations of the employer or the employer's customers. The employee's primary duties must include the use of discretion and independent judgment on matters of significance.
* Professional: Primary duties must be work requiring advanced knowledge in a field of science or learning customarily acquired by prolonged, specialized, intellectual instruction and study.
While the 2020 FLSA changes focus on pay levels, such changes provide an important opportunity to re-examine organizational structures and pay practices to be sure you are not only complying with the law, but also managing in ways that promote productivity, morale, and overall leadership and management effectiveness.
Good, clear communications are especially significant in this process to address employee apprehensions and perceptions of being "demoting" and other personnel and position actions resulting from FLSA mandates.
Give us a call if you want to be sure you're managing this change process as well as possible and anticipating blind spots that bring new cost implications down the road.
Call or Email now to get the jump on 2020 Salary Administration Planning in light of current and projected pay practices!
Submitted by SCCCC Member:
Dave Martin, President & CEO
HRA Services, Inc.
Ph. (610) 869-4494
FAX (610) 869-4427