Recently the U.S. Department of Labor approved a change to the minimum salary threshold for exemption status under the Fair Labor Standards Act. Previously, in order to be considered an exempt worker (meaning an employee does not earn overtime pay), an employee would need to be paid a salary of at least $455/week, which is the equivalent of $23,660 annually. As of January 1, 2020, the minimum threshold has been increased to $684/week, or the equivalent of $35,568 annually. Employers will be required to reclassify any employee making under $684/week to non-exempt as of 2020. This means anyone under $684/week will be eligible for overtime pay at time and ½. Additionally, the new ruling increases the amount “highly compensated employees” need to make to be exempt from $100,000 annually to $107,432.

What does this mean for employers? The Employer Group recommends you begin to review the earnings of your employees currently classified as exempt and determine if you’ll make pay adjustments to keep employees exempt or allow them to fall outside the new thresholds and change them to non-exempt employees. Employers should determine how the decision impacts their total budgets for employee compensation and benefits, determine what your organization can withstand, and what impact any changes would have on your employees.

In the event you plan to make changes, communication and transparency with your employees are key. Communicate throughout the process so employees know what to expect and can plan accordingly. Sudden surprises, especially to someone’s compensation, can create a number of employee relations issues, including staff angst. Sharing total compensation statements, projected wages and any changes to benefits can help employees understand the total impact any changes may have on them and helps build trust and integrity.

If your planning to make changes, or aren’t sure how to begin reviewing your staff’s wages to determine the impact on your organization, the HR professionals at The Employer Group can help. Contact us now to be prepared for this significant rule change.