Setting Up An Employee As Salary Non-Exempt

What are the Department of Labor (DOL) changes? There are a few key revisions that will take place with the new DOL update, mostly of which will impact the salary and compensation amount for Executive, Administrative, and Professional workers to remain exempt. 

When looking at the DOL website, it states the law:

  • Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
  • Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
  • Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.

Also, it is important to know that you can achieve the new standard salary level ($913 a week; $47,476 annually) by using up to 10 percent of a non discretionary bonus or incentive payment. This will also allow for commission to be included up to that that 10 percent. 

These changes will be effective beginning December 1, 2016 and automatic updates to these thresholds will begin on January 1, 2020 and take place every 3 years.

So how can you prepare for these updates? There are a few options available to businesses who need to adjust to the threshold change. Many businesses are turning to their payroll and timekeeping software to help answer their needs. Some businesses are choosing to simply move those salaried employees who will not meet the threshold of $913 per week to hourly in order to remain compliant; other businesses are choosing to keep their employees salary, but also track their hours so they will receive overtime pay when overtime is worked. All of these options are acceptable under the new regulation.

If you do choose to keep an employee salaried, but will need to track their hours in order to pay overtime you can create a new time policy within your payroll and timekeeping software to track this. The new policy will then transfer over to your payroll software and populate the overtime hours based on the rules you set up in timekeeping. If those salaried employees do not want to punch in and out on a daily basis you can allow them to simply input their hours within their employee self service (ESS). This will allow for the tracking of hours needed in the event of an audit, while also relieving the employee of having to physically punch. 

If you need assistance setting up the classification of an employee you should reach out to your payroll software provider. If you’re currently running payroll in house and would like to learn how Time & Attendance software can help you properly track employee hours please request more information below.