Some of your employees may have become newly eligible for overtime pay on Jan. 1.
The U.S. Department of Labor has increased the minimum salary for exempt employees to $684 per week – $35,568 annually – from the previous level of $455 per week ($23,660 annually). Any employee earning less than $684 per week is automatically nonexempt and thus eligible for overtime pay.
The new rule allows you to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the minimum salary, called “standard salary level.”
If an employee doesn’t earn enough in nondiscretionary bonus or incentive payments in a given year (52-week period) to retain his or her exempt status, the law allows you to make a “catch-up” payment within one pay period of the end of that year. This payment may be up to 10% of the total standard salary level for the preceding year. The catch-up payment will count only toward the prior year’s salary amount and not toward the salary amount in the year in which you pay it.
The new rule also raises the total annual compensation level for “highly compensated employees” from $100,000 to $107,432 per year. This can include nonsalary pay as long as the employee receives at least $684 per week on a salary basis and cannot include “payments for medical insurance, payments for life insurance, contributions to retirement plans, and the cost of other fringe benefits.”
In 2016, the Labor Department adopted a rule raising the highly-compensated-employee salary threshold to $913 per week and making future increases to the threshold automatic. However, a U.S. District Court in Texas invalidated that rule, which never went into effect. The most recent salary thresholds have been in effect since 2004.
For more information about the new salary rule, see these Labor Department FAQs.
Is it time to take a look at staffing in your practice? TMA Practice Consulting can evaluate your staff salaries and benefits, and help streamline workflow, determine efficient staffing levels, and more. Contact a consultant at (800) 523-8776 or via email.
Legal articles such as this are intended to help physicians understand the law by providing legal information on selected topics. These articles are published with the understanding that TMA is not engaged in providing legal advice. When dealing with specific legal matters, readers should seek assistance from their attorneys.