HR Management & Compliance

Job Pricing Around The $47,476 Salary Threshold for Overtime Exemption

By Susan Prince, JD, M.S.L., Legal Editor

In light of the Department of Labor’s (DOL) final overtime regulations under the Fair Labor Standards Act (FLSA), a formal compensation administration program is an important management tool for ensuring that employees are satisfied, that both internal and external equity are maintained, and that control is maintained over compensation costs and the allocation of overtime hours. Establishing an effective compensation administration program requires job analysis, job evaluation, and job pricing.

The DOL’s final overtime regulations have increased the salary level required for exemption from overtime to an annual salary of $47,476, up from the current threshold of $23,660 annually. This translates to a weekly salary of $913. This means that your employees who currently earn more than $455 per week, but less than $913 per week, must be reclassified as nonexempt by December 1, 2016 and will be entitled to overtime for any hours worked over 40 in a week.

Job analysis and the new regulations

Prior to this transition, each job in your organization potentially affected by the new regulations should be thoroughly analyzed and described. Accurate job descriptions provide a basis for job evaluation, wage and salary comparisons, and an equitable wage and salary structure. Many job descriptions contain the following seven elements:

  1. Job identification/position summary,
  2. Essential functions,
  3. Skills,
  4. Knowledge,
  5. Attributes,
  6. Experience and education, and
  7. Physical and environmental conditions.

This framework may vary from employer to employer and from job to job. One important thing to remember is that all job descriptions within an organization should follow the same rules for application of a particular format. Those individuals responsible for writing them should receive similar instructions and follow the same guidelines so that valid comparisons can be made among jobs.

Employers should note that a job title alone is insufficient to establish the exempt status of an employee. Instead, the status of an employee must be determined on the basis of whether the employee’s salary and duties meet the requirements of the changing regulations.

If your company has not updated its job descriptions in over a year, it is possible that the actual work performed by employees under your current job titles has changed. Therefore, you may want to confer with managers, supervisors, and the employees when updating job descriptions.

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