New guidelines on employees that are paid a salary
Effective July 1, 2024, the new standard salary wage is not less than $844 per week or $43,888 annually. On January 1, 2025, this increases to $1128 per week or $58,656 annually. There will be another increase July 1, 2027, and every three years thereafter. Highly compensated employees rate is $132,964 on July 1, 2024, and $151,164 on January 1, 2025.
Agricultural employers (943 filers). Agricultural wages are not subject to overtime. However, if you pay them a salary you must keep track of hours worked each day/week. Their weekly wages cannot go below the minimum wage (hours worked/pay).
Overview on salaried employees. These are the following Fair Labor Standards Act (FLSA) definitions of “exempt” employees who can be paid a salary and not be subject to overtime pay:
- Executives – to quality for the exemption (not subject to overtime) all the following tests must be met:
- Must be compensated on a salary basis at a rate not less than $844 per week
- Primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise
- Must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; AND
- Must have the authority to hire or fire employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
- Administrative Exemptions – to quality for the exemption (not subject to overtime) all the following tests must be met:
- Must be compensated on a salary basis at a rate not less than $844 per week
- Primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or employer’s customers; AND
- Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance
- Professional – to quality for the exemption (not subject to overtime) all the following tests must be met:
- Must be compensated on a salary basis at a rate not less than $844 per week
- Primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominately intellectual in character and which includes work requiring the consistent exercise of discretion and judgment
- Advanced knowledge must be in a field of science or learning
- Advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction
- Computer – to quality for the exemption (not subject to overtime) all the following tests must be met:
- Must be compensated on a salary basis at a rate not less than $844 per week
- Must be employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field.
There are more guidelines for this field – please contact LattaHarris for more information.
- Outside sales – please contact LattaHarris for more information on this exemption.
- Highly compensated employees – please contact LattaHarris for more information on this exemption.
Being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work. Subject to exceptions listed below, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked. Exempt employees do not need to be paid for any workweek in which they perform no work. If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.
Deductions from pay are permissible when an exempt employee: is absent from work for one or more full days for personal reasons other than sickness or disability; for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions. Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes
If you are paying an employee a salary and the employee does not qualify under one of the above exemptions then that employee is subject to receive overtime pay. You following guidelines must be adhered to (at a minimum):
- Employees must track their time on a weekly basis either by a time clock or other written means. Workweeks do not need to coincide with the calendar week, but may begin on any day and any hour of the day. The workweek must stay consistent.
- You must calculate their hours each week to determine that their salary does not make them fall below minimum wage (including overtime hours).
TYPICAL PROBLEMS ON OVERTIME CALCULATIONS:
- Fixed Sum for Varying Amounts of Overtime: A lump sum paid for work performed during overtime hours without regard to the number of overtime hours worked does not qualify as an overtime premium even though the amount of money paid is equal to or greater than the sum owed on a per-hour basis. For example, no part of a flat sum of $180 to employees who work overtime on Sunday will qualify as an overtime premium, even though the employees’ straight-time rate is $12.00 an hour and the employees always work less than 10 hours on Sunday. Similarly, where an agreement provides for 6 hours pay at $13.00 an hour regardless of the time actually spent for work on a job performed during overtime hours, the entire $78.00 must be included in determining the employees’ regular rate.
- Salary for Workweek Exceeding 40 Hours: A fixed salary for a regular workweek longer than 40 hours does not discharge FLSA statutory obligations. For example, an employee may be hired to work a 45 hour workweek for a weekly salary of $405. In this instance the regular rate is obtained by dividing the $405 straight-time salary by 45 hours, resulting in a regular rate of $9.00. The employee is then due additional overtime computed by multiplying the 5 overtime hours by one-half the regular rate of pay ($4.50 x 5 = $22.50).
- Overtime Pay May Not Be Waived: The overtime requirement may not be waived by agreement between the employer and employees. An agreement that only 8 hours a day or only 40 hours a week will be counted as working time also fails the test of FLSA compliance. An announcement by the employer that no overtime work will be permitted, or that overtime work will not be paid for unless authorized in advance, also will not impair the employee’s right to compensation for compensable overtime hours that are worked.