To Exempt or Not Exempt

Are you ready for the December 1, 2016 deadline? After two years of debates and evaluations of comments, a final rule was implemented on May 18, 2016 the final rule was published (DOL Final Rule) with an effective date of December 1, 2016.  The primary effect of this rule on employers is that exempt employee’s minimum standard has more than doubled.  Exempt employee’s minimum salary will now be set at $ 913 per week ($47,476 annually).   The minimum standard is also set to be adjusted every three years with the next adjustment beginning January 1, 2020.

In 2014 President Obama instructed the Department of Labor (DOL) to evaluate and propose a new rule that would address the deficiencies in the existing laws.  These deficiencies were some industries paying managers and team leads the minimum salary of $ 455 per week ($ 23,660 annually and then those companies expected those employees to regularly work more than 40 hours a week.  This of course led to some situations where managers were being paid less than the employees they supervised.

What does this mean for your business?  First, you need to ensure that all of your exempt employees meet the new minimum standard.  A simple report from payroll/HR can give you an idea if you already comply with the new regulation.

If you do have exempt employee’s that are below the minimum threshold, you will need to decide whether to increase their salary or move that employee to hourly.   In the event, you need to move the employee to hourly, make sure that you meet with the affected employee and explain the reasoning behind the change.  Additionally, you will also want to ensure that the employee understands the importance of keeping an accurate track of hours’ work.

Keep in mind that an adjustment to hourly may produce some hurt feelings and dissatisfaction.  Often, employees see exempt status as a higher position than and hourly employee or if they are like me, just don’t like to fill out time cards.

While you are checking the salary requirements, HRCentral also recommends reevaluating your job descriptions for accuracy and ensuring that each position is truly exempt.

For more detailed information on how to prepare, On July 2, 2015 we published an article for preparing for the new exempt rules.  Preparing for New Exempt Rules

It’s not too late to be prepared, HRCentral is here to help you and your HR Department be prepared.  Contact us today.