This is part 2 of 4 HRX posts related to the new federal overtime rule. A helpful FAQ also is available.
A previous HRX post addressed which employees educational entities should check for compliance with the new Fair Labor Standards Act (FLSA) regulations requiring exempt employees earn at least $35,568 annually or $684 per week starting on January 1. In this post, we’ll explore how to calculate weekly salaries for compliance checks.
Check annual salaries first
Exempt employees who make more than $35,568 per year meet the new threshold and are compliant with the new rule.
However, because many school employees work ten or eleven months of the year, some exempt employees who earn less than $35,568 annually may still meet the new threshold for weekly pay. Remember that the Department of Labor (DOL) considers the amount of pay earned per week, not the amount distributed in the paycheck.
Calculating weekly salaries
There are two approaches for calculating weekly salary—one that is more conservative and one that is less conservative. The more conservative approach can help protect educational entities from underestimating time worked by employees, so HR Services recommends using this approach more liberally than the less conservative approach.
More conservative approach: Count the number of total weeks between the beginning and end of the employee’s duty calendar, regardless of whether work is performed in that week. Divide the annual salary by the number of weeks calculated. Example:
$29,000 annual salary / 44 weeks = $659 per week
Does not meet threshold
The DOL has clarified that school districts can exclude from the calculation any weeks in which no work occurs. However, in many districts exempt staff may perform work during a week in which they’re not scheduled to work. This conservative calculation would be used for employees who might possibly work in a week not scheduled for work. Common examples include a payroll supervisor who works over winter break to oversee payroll processing, or a maintenance director who answers an alarm call during spring break or is called into work because of frozen pipes during the winter break. Remember, any week in which any work occurs—even checking e-mail or answering phone calls—is a work week, according to the FLSA regulations.
Less conservative approach: This approach assumes that absolutely no work of any kind will occur during weeks not counted in the calculation. Count the number of weeks between the beginning and end of the employee’s duty calendar in which the employee performed any work. Weeks where work is not performed, like spring break, Thanksgiving, and winter break are not included. Divide the annual salary by the number of weeks calculated.
$29,000 annual salary / 40 weeks = $725 per week
This method should be used only for those exempt employees who definitely would not perform any work during a week not scheduled for work.
The salary comparison for part-time professional exempt employees cannot be prorated to account for their part-time schedules. They must meet the salary threshold regardless of how many days or hours they work per week. For example, a part-time occupational therapist who works two days per week must earn $684 per week to remain exempt.
There are two basic ways to address employees whose pay doesn’t meet the new salary thresholds. First, you could raise the salary to the prescribed threshold. For professionals who meet the duties test to be classified as an administrator in an educational establishment the amount must be either $684 per week or, if comparing to teachers, at least the annual starting teacher salary in your entity. The salary of all other exempt staff would be at least $684 per week. Issues to consider when raising salaries include:
- Resulting pay compression
- Cost to the educational entity
- Timing of increase
The second option is to treat employees as nonexempt. This means identified employees:
- Are subject to FLSA timekeeping requirements and must maintain weekly time sheets that accurately reflect hours worked
- Must be paid at least minimum wage when their salary is translated to an hourly rate
- Must be paid for all hours worked
- Must receive an overtime premium for any hours worked over 40 in a workweek
Read more in Part 3: Communicating the Changes. View previous posts on the subject in the HR Laws section of the HRX archive, including a helpful FAQ. General guidance and an FAQ section are also available through the DOL.
Erin Kolecki and Keith McLemore are Compensation and HR Consultants at TASB HR Services. Send Erin or Keith an email at email@example.com or firstname.lastname@example.org.
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