Massive Increase In Minimum Salary For Workers Exempt From Overtime Takes Effect December 1.
Earlier this year I wrote an article about the United States Department of Labor’s efforts to push through regulations that would instantly double minimum salaries for millions of employees and put a damper on a lot of salary plus incentive compensation packages.
Well, they did it.
The “minimum wage” for most full-time, salaried workers exempt from overtime is about to double. Moreover, employers will get a little, but not very much, credit for non-discretionary bonuses and commissions. The new regulations have cleared the White House Office of Management and Budget review process, and they will be released to the public any day now. As announced on the DOL website, www.dol.gov/whd/overtime/final2016/, highlights of the new rule are as follows:
The minimum mandatory salary for most full-time, salaried workers exempt from overtime will increase from $23,600 per year to $47,476 per year;
There will be a mechanism for automatically updating the minimum salary levels every three years. In other words, the levels will probably go up every three years.
Employers will be able to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new salary level.
The effective date of the final rule is December 1, 2016. Future automatic increases – I guess we should officially call them “updates” - to the minimum salary will occur every three years, beginning on January 1, 2020.
If you do the math, you’ll figure out that even with non-discretionary bonuses and commissions, an employer will have to pay an exempt employee a salary of at least $42,728.40. That may put an effective end to the “$3,000 per month plus commission” compensation package. Many employers have and will continue to look at shifting salaried workers to hourly packages, and paying those workers overtime.
Look for more updates with more details once the DOL posts the final regulations.
The information in this article is not legal advice, and you should not take any action based on information you find in this article without first consulting qualified legal counsel concerning the facts and circumstances of your situation. No attorney-client relationship is established by reading this article.