Within the realm of human resources for business, one of the single most important areas is payroll services. And within this broad area, a factor that’s seen some recent changes relates to hourly employees who qualify for overtime, plus exemptions involved in this process for certain employees.
At WTA Inc., we’re proud to provide a wide range of human resource services, including payroll services and several related areas. When you hear a business professional or HR team member talk about exempt versus non-exempt employees, what are they talking about? And how do recent changes from the Department of Labor play a role in this area? Here are some basics to understand.
What Exemption Means
As we noted above, exemptions in this scenario speak to whether a given employee is eligible for overtime payments. Exempt employees are those who are not subject to overtime hours or tracking, usually on a salary, and they must typically meet the following conditions to qualify as exempt:
- Paid at least $35,568 per year, or $684 per week, as of January 1, 2020.
- Paid on a salary basis rather than hourly.
- Performs exempt job duties, generally including high-level areas. Definitions here come down to actual responsibilities and duties, not job titles alone – services may be provided to clients, businesses, corporations or even government agencies. More information on exemptions can be found here.
Non-exempt employees, then, are those who are paid by the hour instead of on a salaried basis. In such cases, any employees who work above 40 hours in a given week will have the right to claim overtime and receive time and a half pay for these hours.
Recent FLSA Changes
Everything we’re discussing here is governed by the Department of Labor, or DOL, and as we’ve alluded to previously, there have been some major recent changes in this realm that are worth discussing. Namely, the Fair Labor Standards Act, or FLSA, has been updated as of the beginning of the 2020 calendar year. The FLSA is the document governing overtime pay and exemptions, plus several other important areas. Some of the changes include:
- “White collar” exemptions, which we discussed above, increased from $455 per week to $684 per week.
- Total annual compensation requirement for salaried employees in the “highly compensated” category rose from $100,000 to $107,432.
- Employers now have the ability to use bonuses and incentives (such as commission) to account for up to 10% of a standard salary level for a given employee.
There will also be specific exemptions for workers in certain industries, which has always been the case under the FLSA.