Total Team Solutions Blog

Exempt Status Change

By: Rob Lynn

On Dec. 1, the federal annual salary threshold for employees exempt from overtime pay will double, increasing to $47,476 from $23,660. Employees who make less than the threshold must be paid time-and-a-half for any hours worked beyond 40. If employers want employees earning below the threshold to remain exempt from overtime pay, they must increase their salaries to at least $47,476.

So how are the reclassified workers handling the news that on December 1^st they will become hourly employees?

HR departments across the country are having to deal with a very difficult employee communication as they have to tell salaried workers, who may work more than forty hours to get a job done, that they must now track their hours and leave their work unfinished upon reaching their forty hours.  With this communication may come confusion, resentment, and perhaps misguided anger as they perceive that they are being demoted to non-exempt status.   Some workers who will be impacted by the new federal wage threshold may view their salary status as an acknowledgment of their skills, education and professionalism, and they may become disheartened to learn they must keep close track of their hours and break time.

Morale may also be impacted as the former salaried workers who routinely came to work a few minutes early to make coffee and socialize on the previous night’s baseball game or latest TV show, will now be told that they should clock in upon entrance to the offices and begin their work day.   A change in classification will also impact those employees who worked extra time to accomplish their responsibilities in order to make the company better, take pride in their accomplishments and achieve better performance reviews.  Will the forty hour worker be seen as less productive by management and therefore reduce their opportunity for advancement?

The change in classification presents an opportunity for the business owner to review job descriptions, compensation, scheduling, & corporate culture.  By making the exempt status change wage neutral for the employee along with the opportunity to earn overtime on occasion, then the change should have less of a negative impact.  The newly non-exempt employees who earn additional wages from overtime should be pleased that they are getting compensated for the personal time they have sacrificed for the company’s behalf.

For those employees that remain exempt from over-time, the key will be not to shift the workload from the hourly to those that remain on salary, as that may cause resentment if duties are expanded but compensation remains static.

If the company effectively communicates the classification changes, maintains productivity while keeping the impacted employees wage neutral, then this new law should have little to no impact on operations.

Since 1988, Total Team Solutions has provided payroll, cost effective employee benefit sand HR administration services.  To Learn how TTS helps our clients with the above services, please contact Rob Lynn at rlynn@ttspro.com

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