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New FLSA Salary Basis Test

By: LeiLani E. Quiray

Hey to all our lovely be the change HR community!  We’ve got some big changes we let you know about last month happening on July 1, 2024.  And as a fun way of making sure you’re in know I added a little humor for you.  😉

Okay what’s FLSA.  

Florida

Likes

Sassy

Apples

^^this is what came out of my brain right now hahaha.  Also apples….mmmm.

Fair Labor Standards Act <- no apples here but grab one to snack on through this part.

NOTE: This is federal level, not state.  I’ll talk about that later.  

The Fair Labor Standards Act (FLSA) sets standards for minimum wage, overtime pay, and other employment practices. The salary basis test is part (only part) of the criteria used to determine whether employees are exempt from these requirements under certain white-collar exemptions. As of the latest updates, here are the key components of the salary basis test and its thresholds:

Salary Basis Test

The salary basis test stipulates that to qualify for an exemption from overtime pay, employees must be paid a predetermined and fixed salary that is not subject to reduction based on the quality or quantity of work performed. The salary must meet or exceed a specified dollar threshold.

New Thresholds

As of today, the salary thresholds are:

1. Standard Salary Level: The standard salary level is set at $684 per week ($35,568 annually for a full-year worker).
2. Highly Compensated Employees (HCE): The threshold for highly compensated employees is $107,432 annually, which includes at least $684 per week paid on a salary or fee basis.

As of July 1, 2024 the salary thresholds will be:

1. Standard Salary Level: $844 per week (approximately $43,888 per year for a full year worker)
2. Highly Compensated Employees (HCE): $132,964 

As of January 1, 2025 the salary thresholds will be:

1. Standard Salary Level: $1,128 per week (approximately $58,656 per year for a full year worker)
2. Highly Compensated Employees (HCE): $151,164

This is a 20k jump for the regular test from July to January and a 40k jump for HCEs.  

Duties Test

In addition to meeting the salary basis test, employees must also meet the duties test for the specific exemption category they fall under (executive, administrative, professional, computer, or outside sales). This is another explanation and blog for another time though…we’re only talking salary basis test this go.

More apples here! 

So, said very simply, if your salary exempt employees do not make those amounts as an annual salary by the dates listed above they need to be classified as nonexempt and paid hourly.

Actionable Steps

I wasn’t going to leave you hanging (far reaching apple reference) and not help out without strategies!

Here are some easy steps for you to take and for our be the change HR clients, we will be reachng out to you to do this for you cuz we cool apples like that:

1. Run a report and look at all your salaried folks; view it as annual salary
2. Mark those outliers on the salary thresholds now, on 7/1 and 1/1/25.  
3. Identify if those folks are close enough to adjust their salary up.
4. If adjusting salaries look at any wage compression issues (if you’re increasing one person’s salary creates too far or too little a gap based on predetermined salary ranges).
5. FANCY STEP: Do a compensation analysis to see where the current pay is according to the market.  Are you paying with the market?  Also a great way to look at adjusting salaries or having a case for not increases salaries. Not a client ->  We can help with this.  
6. Draft out an action plan and get all stakeholders involved on these changes.
7. For those who do not meet the salary basis test, prepare communication to each employee to convert them to hourly.
8. Prepare talking points for stigma responses (some might feel going from salary to hourly is a “demotion”).  The Company is doing the right thing by their employees. 🙂
9. Prepare paperwork converting them from salary to hourly (you can use an Offer Letter format) and have them sign.
10. Ensure you have a proper timekeeping system for clock in/out, meal periods and OT calculations

Now that we went Federal OF COURSE there are states where this rate is higher. These are the currently salary thresholds for 2024 that are above the Federal level:

Alaska

$48,796.80

California

$66,560

Colorado

$55,000

Maine

$41,401

New York

$58,458.40

New York (NYC, Nassau, Suffolk and Westchester)

$62,400

Washington

$67,724.80

These will go up in 2025 as well.

If you made it to the end…

Also, I hope you’re doing okay.  That’s a barrel of information and sometimes as a business owner I know it can feel daunting when you hear this kinda HEAVY info.  

At the end of the day it’s important you know and you also know me and my shiny bunch of amazing HR Pros are here to help you too.  You don’t have to go these things alone.

In Support,

-L

LeiLani E. Quiray is the Founder and CEO of be the change HR, Inc., certified Minority and Woman owned, a conscious company and social enterprise, providing HR support for small-to-medium sized businesses in any facet of HR from pre-hire to post-term and everything else that happens in between. She and her team also teach free job readiness courses and provide free coaching to trafficking survivors.  Her team is not only HR Pros, they are Life Changers. 

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