The Department of Labor (DOL) issued a final rule on September 24th that increased the salary minimum under the Fair Labor Standards Act (FLSA). The salary-level for exemptions have moved from $455 a week to $684 a week and goes into effect January 1st, 2020.
Essential information all business owners need to know under this final rule:
- Exempt employees must earn at least $35,568 per year ($684 per week).
- Non-discretionary bonuses and incentive payments may constitute up to 10% of the standard salary threshold.
The FLSA duties test remains unchanged.
The Highly Compensated Employee (HCE) Exemption salary threshold is now $107,432 per year.
Some states and locations, such as California and New York City, have salary thresholds which are higher than the federal standard.
Updates to the salary threshold are expected to occur regularly to ensure that these levels continue to provide useful tests for exemption.
These updates will extend overtime pay protections to over one million additional workers across the country.
What should employers do to comply with the FLSA changes?
It is crucial for business owners and Human Resource professionals to review current employee classifications and pay rates to:
- Determine which employees are affected by the new rule.
- Make the necessary re-classifications and adjustments, and
- Execute an overall communication strategy to employees.
This rule may also have a ripple effect, impacting other HR related policies and practices such as employee benefits and pay compression and even employee engagement.
Be sure to maintain consistency in your pay practices.
With the recent regulatory changes affecting employee’s pay from so many different angles (minimum wage increases, mandatory sick time, employee classifications, and overtime regulations, etc.), it’s easy to take an informal approach to compliance. This approach could result in falling out of compliance with other employment law requirements. Maintaining a justifiable compensation practice is critical for both your compliance initiatives and strategies to attract and retain top talent.
At Dube Consulting, we highly recommend that employers review their compensation practices as part of the process of auditing their FLSA classifications, to ensure that they not only comply with these new employment regulations but that their overall approach to compensation and benefits remains cohesive and maintains internal and external equity.