Just Another Exemption Conundrum (Dun Dun Dun)

by Carey Klosterman on November 14, 2016

in Compensation,Questions

headache

I have recently been getting questions from organizations that have already established wage ranges, asking how the new exemption rules may affect their exempt level employees. The issue concerns situations when the range minimum doesn’t meet the new threshold, and there is a blend of employees who are classified as exempt and nonexempt included in these ranges.

So, first and foremost, if the employee is classified as exempt (and they pass the duties test), if they are paid at or above the new threshold of $47,476 they are good to go! However, if you have a policy in place where new hires start at the minimum, then you may have an issue that needs to be addressed.

In the following example, the current salaries meet the new threshold for all but one job, the Accountant. In order to maintain the exemption for the Accountant, the current salary would need to be increased to $47,476 by December 1, 2016, or the job should be reclassified to nonexempt. Pretty simple fix!

However, the range minimum for all the jobs listed are below the threshold. What if your Office Administrator is terminated and you look to rehire? Your internal processes have the new person starting at the minimum which is below the new threshold. Now what?

Job Title FLSA
Status
Current
Salary
Range
Minimum
Midpoint Range
Maximum
Human Resources Generalist Exempt $48,500 $38,400 $48,000 $57,600
Office Administrator Exempt $51,200 $42,800 $53,500 $64,200
Payroll Supervisor Exempt $52,500 $44,000 $55,000 $66,000
Accountant Exempt $47,200 $39,100 $48,900 $58,700
Production Supervisor Exempt $47,500 $33,600 $42,000 $50,400

Here are a few options you could consider:

  • Reclassify the job as nonexempt.
  • Revise processes and job descriptions for exempt employees that may reflect a higher level job and greater responsibilities, which will help justify paying the employee higher in the range in order to meet or exceed the new threshold.
  • Develop different ranges for exempt and non-exempt employees, ensuring that the minimum never falls below the new threshold for exempt employees.

As always, it is imperative to ensure that employees who are classified as exempt are meeting both the duties test as well as the salary test.

Just a friendly reminder: As we anticipate the December deadline for compliance, make sure you are prepared; however we do recommend that you don’t make any changes until December 1.

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