When Can You Deduct from an Exempt Employee’s Pay?

The Fair Labor Standards Act (FLSA) requires that all employees be paid at least minimum wage for all hours worked as well as pay of at least one and one half times their regular rate of pay for all overtime hours worked over 40 hours in a workweOLYMPUS DIGITAL CAMERAek. Employees who are classified as exempt are not subject to these minimum wage or overtime requirements.

In order to be classified as exempt, the employee must be paid on a salary basis of at least $455 per week. In addition, the employee’s work must meet certain duties tests as established by the Department of Labor (DOL). You can read more about this here.

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New Salary Threshold for Exempt Employees

UPDATE: November 22, 2016 – A federal judge has delayed the new overtime rule. At this time it is not known how long the rule will be delayed or if the new rule will be enforced at all in the future.  The minimum salary threshold for exempt employees will remain at $455 per week until further notice.

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The Department of Labor (DOL) has issued the much anticipated final rules regarding overtime for salary employees.

Under the Fair Labor Standards Act (FLSA), the minimum pay for exempt employees is currently $455 per week (or $23,660 per year). Under the new rule, effective December 1, 2016, the minimum pay will increase to $913 per week (or $47,476 per year). The salary threshold will automatically be updated every three years, beginning on January 1, 2020, based on average wage growth.

An added provision of the new rule is the ability for employers to include nondiscretionary bonuses and incentive payments, including commissions, up to 10 percent of gross wages, to meet the minimum salary requirements. For example, if an employee is paid $44,000 base salary and receives a bonus of $4,000 per year (less than 10% of their gross annual salary), they could still be considered exempt under the new rule because their total compensation ($48,000) is higher than the new salary threshold.

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