Weekly HR News – Budgets
Increase In Salary Level for Exempt Employees Will Affect 2016-2017 City Budgets
By now, most of you have heard about the Department of Labor’s (DOL) changes to the regulations that mandate which executive, administrative, and professional employees are entitled to the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay protections. The current regulations were last updated in 2004, and stated that an employee must make at least $455 per week ($23,660 per year) to be exempt from overtime. With the new change, which is effective December 1, 2016, the DOL has updated the salary level required for exemption to $913 per week ($47,476 annually), with automatic increases every three years to maintain the level at the 40th percentile of full-time salaried workers in the lowest-wage census region.
Both KLC and the National League of Cities (NLC) are very aware of the impact that these changes have on cities and as such, submitted comments last August in response to the Notice of Proposed Rulemaking. The two primary recommendations were (1) to use a regional approach (due to variations in pay based on location) and (2) to implement the change over the course of three years. Here is an excerpt from the Final Rule discussing the concerns:
“After considering the comments, the Department has made several changes from the proposed rule to the Final Rule. In particular, the Department has modified the standard salary level to more fully account for the lower salaries paid in certain regions. In this Final Rule, the Department sets the standard salary level equal to the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region (currently the South).”
What does this mean for city budgets right now? Any of your employees that are currently making less than $913 per week would be entitled to overtime for any hours worked over 40. As cities begin budget preparations for the coming fiscal year they should include the increased overtime costs based on the passage of this rule or consider an increase in wages for employees that may be close to the threshold. However, be aware that an increase in compensation, whether it is salary or overtime, could result in pension spiking issues penalties.
The Department of Labor is offering several free webinars to review these changes. More information on the webinars can be found on the DOL website. In addition, KLC is offering an all-day training June 1 that will offer in-depth discussions on this topic as well as many others. Information and registration for Part I of this training can be found on the KLC website.
If you have any questions about this or need any additional information contact Andrea Shindlebower Main, KLC personnel services specialist.