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KMA Human Resources Consultant Anita Krieg has put together these tips to help employers consider how the proposed Department of Labor (DOL) change to the Fair Labor Standards Act (FLSA) exempt salary level and the City of Portland’s minimum wage increase (which takes effect next year) will affect their businesses.

“As you begin to plan for 2016,” says Anita, “now is a good time to review employee compensation, classification, and budgets so you can be ready prior to January.”

Proposed Increase in Minimum Pay for Exempt Positions

First, employers should review any positions classified as exempt that are now paid under the DOL proposed threshold of $970 per week or $50,440 annually. If the change goes into effect, these positions will need to be classified as non-exempt or have their salary increased to be in compliance.

  • Review costs and budgets and consider whether raising salary levels or paying overtime is more cost effective.
  • To help with decision making, get a handle on how many hours employees who may be affected by the new exemption thresholds are now working.
  • If pay varies and some employees with the same job title are paid above the threshold and some below, all employees should be reviewed. Then you will need to determine if these employees should be kept together in the same classification (either all exempt or all non-exempt).
  • You may opt to pay employees with salaries under $50,440 as “salaried, non-exempt,” but would have to pay overtime if their hours exceed forty in a work week.

Next, determine whether positions classified as exempt meet the current duties test. If key required duties are missing, even if pay meets the $50,440 amount, now is a good time to classify these positions correctly as part of your overall review. For example:

  • Administrative employees—Are they exercising independent judgment and discretion? Can they make policy decisions without checking with someone?
  • Executive employees—Do they manage an area and supervise at least two or more full-time equivalent staff with substantial input on personnel decisions?

Reviewing these issues will help you be ready to make changes, but you may want to wait until final regulations are issued before actually reclassifying your employees based on salary level.

City of Portland Minimum Wage Increase

If your business employs minimum wage workers in the City of Portland, the new minimum wage increase effective January 1, 2016 will substantially increase staffing costs.

  • Employers should be consider staffing budgets and how this change will affect the cost of services or products.
  • Other positions paid above minimum wage should be reviewed as well to determine how an increase in minimum wage for some jobs may impact compensation equity and the need for additional pay increases.

Taking a look at these compensation and budget issues now will help you be ready for 2016. If you have questions or need help, KMA is here to assist.  Contact us today.