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Big Changes to Salary vs. Employee Laws

Changes to Overtime Regulations

Starting December 1, 2016, there will be a big (over double)change to the federal requirements for classifying an employee as a salary rather than hourly worker. This change will increase the minimum compensation level as follows:

Current Requirements

Requirements as of December 1

Weekly

$455.00

$913.00

Annually

$23,600.00

$47,476.00

Salaried workers who earn less than $47,476.00 will need to be reclassified or have their pay adjusted. The department of labor estimates over 4 million employees will be effected by this change. As such, now is an ideal time to review the classification of your employees and prepare for the financial impact of the new law.

In order to classify an employee as salaried, there are three tests which must be satisfied:

1. Salary Basis Test: compensation must be predetermined and fixed salary regardless of quality or quantity of work

2. Salary Level Test: compensation must meet a minimum threshold which will be increasing from $455.00/week to $913.00/week

3. Duties Test: The tasks and responsibilities must meet the requirements of the regulations as executive, administrative, or professional.


With the new changes to the salary level test, it is important to evaluate employees making under $913.00 per week. Some options include:

A. Raise salary to meet the new level.

B. Keep the salary, report all hours worked, and pay overtime.

C. Keep the salary, report all hours worked, but limit the work week to 40 hours (overtime will still need to be paid if the worker goes beyond 40 hours)

D. Reduce the hourly rate to account for overtime increase of additional hours worked.

Businesses should plan for financial and legal consequences of the new changes. It is important to review all salaried employees in order to prepare for the financial impact higher wages or reduced hours. Additionally, reviewing your handbooks and internal policies will help ensure that you are in compliance with New Hampshire and Federal employment laws.

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