by Michael Cieri, CPA
Effective December 1, 2016, if you have a full-time salaried employee who earns a yearly salary of $47,476 or less, or weekly pay of $913 or less, you must now keep track of hours worked by the employee and pay overtime wages whenever he or she works over 40 hours in a workweek.
In order to be exempt from overtime, an employee must meet all parts of a 3-part test:
- The employee must be salaried. That is, her pay must be predetermined and fixed and not subject to reduction because of variations of quality or quantity of work.
- The employee must have a weekly salary that is greater than $913 a week or $47,476 annually.
- The employee must perform primarily executive, administrative or professional duties.
If you have an employee that would be exempt but for the fact that his salary is now less than the new salary test amount, it is possible to use nondiscretionary bonuses and incentive payments, such as commissions, to satisfy up to 10% of the standard salary, provided that these payments are made at least quarterly.
If you have an employee that will now be subject to these new overtimes rules, you might consider the following options:
- Pay the employee overtime wages for overtime hours worked
- Increase the employee’s salary to above the minimum level
- Reduce or eliminate overtime hours
- Reduce the employee’s base salary so overtime wages plus base salary equals the desired wage level
It will be important to understand the effects of these new rules on your business before they go into effect on December 1st. If you need any help in determining if you have any employees that will be effected by these new overtime rules, contact John Schachter + Associates today.