Small businesses rely on a diverse workforce, blending salaried and hourly employees to maintain operational efficiency. While salaried employees are typically considered exempt from overtime pay, it’s crucial for business owners to recognize that exemptions aren’t solely determined by job titles. The Fair Labor Standards Act (FLSA) outlines specific criteria for exempt and non-exempt employee classifications. In this article, we’ll explore what small businesses need to understand about overtime pay for exempt employees, covering salary thresholds, exemptions, and the case of administrative professionals.

 Salary Thresholds for Exempt Employees

The FLSA sets forth minimum wage and overtime pay standards for U.S. employees. Exempt employees, usually salaried, aren’t eligible for overtime pay by default. However, meeting specific salary thresholds is key to determining eligibility:

-Standard Exemption Threshold: As of September 2021, employees earning less than $684 per week ($35,568 annually) are generally entitled to overtime pay for hours worked beyond the standard 40-hour workweek.

-Highly Compensated Employee Threshold:** Highly compensated employees (HCEs), earning at least $107,432 annually, may qualify for exemption, provided their primary duties involve office or non-manual work.

Staying abreast of regulatory updates is essential as these thresholds may evolve over time.

Understanding Exemptions

Simply meeting salary thresholds isn’t sufficient for exemption from overtime pay. The FLSA also outlines exemptions based on job duties, categorized as executive, administrative, professional, computer-related, or outside sales.

Administrative Professional Exemption

For small businesses, the administrative exemption holds particular relevance. To qualify, an employee must meet specific criteria:

-Primary Duty: Engage in office or non-manual work directly related to management or business operations.

– Discretion and Independent Judgment:  Regularly exercise discretion and independent judgment in significant matters.

– Salary Basis Test:  Receive a predetermined and fixed salary not subject to reduction based on work quality or quantity.

These criteria aim to differentiate employees handling routine tasks from those significantly impacting business operations and decision-making.

Conclusion

Navigating overtime pay intricacies for exempt employees is crucial for small businesses to avoid legal issues and ensure fair treatment of their workforce. Remember, FLSA regulations can evolve, making staying informed imperative. While salaried employees are often considered exempt, evaluating their job duties alongside salary thresholds accurately determines eligibility.

As a small business owner, proactively understanding and implementing these regulations fosters a harmonious workplace and lays a solid foundation for growth. Consider seeking legal or HR expertise to ensure compliance with labor laws and make informed decisions about employee compensation.