Paying Employees on Salary Soon to Get Expensive

In July 2016, in all likelihood you as an employer will have to start paying your employees more than $50,000 per year if you want to pay them on salary.  If an employee makes less than $50,440 per year, by this summer that employee will need to be paid on an hourly basis and receive overtime whenever the employee works more than 40 hours in any one workweek.

The new regulations proposed by the Department of Labor last summer to increase the required salary basis under the Fair Labor Standards Act are expected to be finalized in July 2016, according to a statement made by the Solicitor of Labor to the New York State Bar Association.

Currently, an exempt “white-collar” employee who can legally be paid on salary only has to make $23,660 per year ($455 per week) and meet the specific duties of a professional, an administrator, a computer professional or an executive. This summer that number is widely expected to increase to $50,440 ($970 per week) and will be tied to an inflation formula that will raise that threshold number annually.

Once the final rule is released in the summer of 2016, employers could have as few as 60 days to get into compliance with those regulations. I’ve written on these proposed regulations before, but the federal Department of Labor is only recently announcing that it is looking at July 2016 as the expected date for finalization and implementation.

The controversial regulations will change how many employers in the Texas Panhandle pay their employees. Many salaried workers in the Texas Panhandle made less than $50,000 per year in 2014, including entry level veterinarians, registered nurses, speech pathologists, auditors, public relations specialists, human resources managers, food service managers and retail managers, according to TexasWages.com.

Even if those workers perform white-collar duties, after summer 2016 you as an employer will not be able to pay them a salary and allow them the flexibility of exempt workers unless you meet the $50,440 salary threshold required by the new regulations.

Your choice will be to raise salaried workers’ pay to the threshold level or to start paying them by the hour and paying them overtime pay each week in which their hours exceed 40.

Right now, you need to be reviewing the job duties and the compensation of every employee to whom you pay a salary. Talk to an employment lawyer now about your options for dealing with this impending change in the salary basis rules so that you can be ready to make changes this summer if necessary.

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