Effective December 1, 2016, the minimum annual salary will be $47,476
(or $913 per week), which is a substantial increase from the current minimum
annual salary of $23,660 (or $455 per week). The salary threshold will be automatically
updated every three years beginning January 1, 2020, which is estimated to be $51,168 in 2020.
Twenty percent of the salary
threshold can be met by
non-discretionary bonuses,
incentive pay or commissions.
The non-discretionary payments must be paid on a
quarterly or more frequent
basis. An employer can make a
“catch up” payment at the end
of each quarter.
The federal regulations also
exempt highly compensated
employees from overtime pay.
The salary threshold for highly
compensated employees will
increase to $134,004 annually
effective December 1, 2016.
However, this federal exemption for highly compensated
employees does not apply to
Pennsylvania employees
because Pennsylvania does not
recognize the exemption for
highly compensated employees. Because Pennsylvania law
provides a greater benefit to
the employee, it trumps the
federal law pertaining to highly
compensated employees.
If you currently employ exempt
employees who earn an annual
salary of less than $47,476,
you should consider the
following options:
1.
Give the employee a raise to
meet the new minimum salary
threshold.
Example: An office manager at a
dental practice is currently paid
an annual salary of $45,000.
Her job duties qualify her for
the administrative exemption.
The office manager regularly
works more than 40 hours a
week to manage the dental
practice. The amount of straight
time pay and potential overtime
pay will exceed $47,476.
Therefore, it makes financial
sense to increase the office
manager’s annual salary to at
least $47,476 to maintain the
office manager’s overtime
exemption.
2.
Pay the employee overtime
at 1 ½ times the hourly rate
for any hours worked over 40
hours in a work week.
After reviewing how many
hours employees work per
week, you may determine that
employees never or very rarely
work more than 40 hours in a
work week. Therefore, even
though a currently exempt
employee may be earning a
yearly salary less than $47,476,
it would not make financial
sense to give the employee a
raise to maintain the overtime
exemption. It will be less
expensive to simply pay the
employee overtime. However,
you will now need to keep
accurate records of the hours
worked per work week.
3.
Reduce the employee’s
working hours to fewer than
40 each week to avoid having
to pay overtime.
You can restructure the work
force by transferring duties
to another employee or hiring
additional employees so no
employee works more than
40 hours per week. Example:
You have two dental hygienists
who routinely work 50 hours
per week. They earn an annual
salary of less than $47,476.
Therefore, each will be entitled
to 10 hours of overtime pay
each week because they do not
meet the new salary threshold
requirement. You could hire a
part-time dental hygienist at
20 hours a week so your fulltime dental hygienists are limited
to 40 hours work per week.
According to the United States
Labor Department’s Wage
and Hour Division, the most
costly mistake for employers is
wrongly labeling employees as
exempt from overtime pay.
With the right planning and
analysis, your dental practice
will be ready for the new
overtime regulations that take
effect December 1, 2016.
Michael J. Crocenzi, Esquire
is a partner in the Harrisburg
law firm of Goldberg
Katzman, P.C. Mr. Crocenzi has
over two decades of experience
advising and representing
clients in many aspects of
employment law, including
the Fair Labor Standards Act
and the Pennsylvania Minimum
Wage Act.
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