Big Issues to Consider

·       Getting the work done the company needs done … at a pay rate which makes business sense and retains staff.

·       Keeping employees engaged at the same or higher level.

·       Complying with the law to accomplish the above.

o   Minimum salary (a different concept than “minimum wage”) goes to $47,476* ($913 per week) on December 1, 2016.

The actual rule is the weekly amount.  Meaning, for example, if you run a bi-weekly payroll, every check must have gross wages of at least $1,826.  You cannot have an exempt person paid, for example, $800 for some weeks and make up the difference in future checks.

$22.82 (annualized) and below per hour will not be enough to be considered eligible to be exempt.

This amount will increase every three years.

o   This is not the only basis on which to not pay overtime to a position: job duty tests remain.

o   Several states are challenging the legal basis for the federal government to make this change. At this point, companies should plan for this to take effect. 

§  Can you delay communication and implementation for several weeks?  Yes.  Delay getting ready to change?  Unwise.

Once a person is identified as currently earning less than $47,476, your core options are:

1.       Raise base pay to federal minimum à person makes more, company should receive same worked hours.

2.       Convert current base rate to an hourly rate and limit/prevent future overtime  à person makes the same, company will receive fewer worked hours.

3.       Convert current base rate to an hourly rate and allow future overtime as needed  à person makes more, company should receive same worked hours (but for different reasons company could get fewer, same or more hours worked).

TIP: If you are going to change the way someone is paid and think you have talked with the person enough about the change, you probably have not.


·       Are all companies covered under the FLSA?  Generally, you must have sales of $500,000+.  If you believe you may not be covered, please discuss all the criteria with an employment attorney.

·       Are some professions not subject to the minimum salary test?  It’s a federal law so “yes” is the complicated answer.  Outside sales, business owners (20%+ and actively involved in the org), teachers, lawyers, doctors and clergy are not.

o   What about church staff?  Members of a religious order are not subject to FLSA rules but the other members of the staff are.

·       Do bonuses count?  Only “non-discretionary” bonuses, paid not less frequently than quarterly, and only up to 10% of the minimum salary amount.

o   Yes, might be very messy math to make that calculation.

·       What if someone is part-time?  S/he still must be paid the minimum weekly salary; there is no prorating based on less than full-time.

·       What if someone is seasonal?  So long as any week of wages are $913 or more, then the person can be exempt for those weeks.

To create a new, hourly base rate, estimate worked hours by one of these methods:

·       Option (a):  merely divide salary by 2,080 where someone making $40,000/2,080 goes to 19.23/hour.

·       Option (b):  if average worked hours are 45 a week then $40,000/2,080/40*45 = 21.64/hour which some will argue is the correct, effective wage.

just to say it, there are reasons to argue for and against including all hours previously worked in the conversion