Hello, and welcome to LegalEdge Training. Today, I want to talk about a new rule that impacts your salaried employees. Now, we touched on this topic a while ago in a segment entitled, Can I Pay Any Employee a Salary? You may recall we answered that question in the negative. No, you cannot pay any employee a salary. Here’s why. Think of it this way: The rule is that all employees are entitled to an hourly wage plus overtime. The exception to the rule is salary. If you think of it this way, you’ll likely stay out of trouble. The exception is salary.

We used to call these exceptions white collar exceptions/white collar exemptions. Now we call them Executive, Administrative and Professional exceptions.

In any event, when you pay someone a salary, that employee is an exception to the rule, which means the employee must meet certain requirements under federal law.

Let’s talk about it.

Salaried employees have to perform certain duties. Those duties are, generally speaking, executive, administrative, and professional duties. There are more subsets, but those are the broader categories. The duties are very specific.

In addition to the required duties, you as the employer must pay the salaried employee at least $844 per week. Now, that’s an increase. That’s the change. That’s the new law. Employers paid $684 in the past. However, as  of July of 2024, if you pay employees less than $844 a week,  you’re not compliant. You must increase the salaries to $844 a week.

And guess what? In January of 2025, you have to increase the salaries again to $1,128 per week. You have a little time to adjust; you will have from July 2025 to January 2025 to meet  the final payment under the salary test. And keep in mind that the salary level is set to increase every three years to stay in line with inflation and the cost of goods and services.

Okay, so let’s wrap up. Can you pay any employee a salary? No. Before you start to pay an employee a salary, you must make sure that employee meets the duties test, meaning he or she is performing certain duties. Then, you must comply with the salary test; the salary just increased to $844 a week and will increase again in January 2025 to $1128 per week.

If you have questions about the duties test, which is a major part that employers fail to understand, please give us a call. We can make sure that your employees are properly classified  as exempt or non-exempt, ensure your job descriptions meet the classification, and ensure you are compliant under federal law.

Thank you so much for joining LegalEdge Training.