How to Prepare for an Increase to Exempt Salary Requirements

As many of you know President Obama proposed an increase to the exempt employee salary threshold this week. This should come as no surprise since the proposed changes have been in the making for a while.

The proposed increase would take the annual salary requirement for an employee to be considered exempt from $23,660 to $50,440. If this were to pass, it would make approximately five million workers who are currently exempt from overtime and minimum wage requirements non-exempt.

Check out this post for more information on who qualifies as exempt under the FLSA.

Good News/ Bad News

The bad news is that this will force you to evaluate several positions within your organization and possibly reclassify them as non-exempt based on the impact of the increase in salary requirements. 

The good news is that you will have plenty of time to evaluate your standing. Once the proposed rules are officially released, there will be a public comment period of 60 days. The Department of Labor (DOL) will then review and respond to comments and draft final rules. This stage can also be a lengthy process.

The last time large revisions were made to the FLSA, in 2004, 13 months elapsed between the introduction of the proposed rules and the release of the final rules. You can expect a large number of comments and much opposition as with everything that has political undertones and the time lapse should be equally as long if not longer.

How to Prepare 

Even though it will probably be late 2016 to early 2017 by the time these FLSA white collar exemptions are changed, you need to start considering how this will impact your workforce right now. Here are a few steps you can take to minimize the burden:

Analyze Your Existing Roles

Run a quick analysis on your existing staff to determine how many individuals will be affected. You will also want to use this time to determine a rough estimate of how much time and money it would take to do an in-depth analysis in the coming months.

Run the Numbers

You should start to get together rough estimates for how the change would impact your labor costs if you had to make these employees non-exempt. You should look not just at the roles, but averages hours worked. You need to keep overtime in mind and calculate where your increases will come from (departmental, role-based, etc). Make sure your company and departmental budgets for 2016 are accounting for potential changes.

Outline a Communication Plan

It is best to start planning an effective way to communicate this to your staff sooner rather than later. If you have employees that think they are suddenly going to be getting a raise when this passes, but you are planning to change them to non-exempt, it is best to get everyone on the same page as soon as something definite comes down.

It is safe to say that there will be an increase to the salary requirements for exempt employees in the next 18 months, it is going to be a matter of what that increase will be. Increasing the amount by nearly double has already garnered significant opposition and this will at least slow the process down, if not lead to a negotiation.

By performing the actions outlined above, you can ensure you are prepared when the increase to the exempt salary requirements takes place.

Thanks!
Matt

PS: If you are looking for a team to help you perform these above functions, check out our outsourced HR model at ERG Payroll & HR. We help employers to focus on their business while we handle tasks like the ones outlined above for them.

 www.ergpayroll.com