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Issue link: https://cpapracticeadvisor.epubxp.com/i/571003
20 September 2015 • www.CPAPracticeAdvisor.com A YEAR IN THE LIFE: PAYROLL ACCOUNTANT T he proposed c h a nge s wou ld double the sa lar y requirement to qualif y for the executive, adminis- trative and professional exemptions, raising the salar y threshold to the 4 0 t h percent i le for w h ite col l a r exemptions and to the 90th percen- t i l e f o r h i g h l y c o m p e n s a t e d employees . T he proposa l is a l so s e e k i n g t o e s t a b l i s h a u t o m a t i c annual increases to the two-salar y t h r e s h o l d s , e i t h e r f i x i n g t h e increases at the 40th and 90th per- centile or t y ing them to infation. W h i l e t h e D O L i s p r o p o s i n g changes to the duties tests, they are look ing for comments on whether t h e d u t i e s t e s t i s w o r k i n g a s intended, and what, if any changes should be made. I f t he proposed r u le become s f i na l, approx i mately 4. 6 m i l l ion employees w i l l need to be eit her reclassifed as non-exempt and paid over t i me or receive a n i ncreased salar y to meet the new exemption requirements. A s a pay roll practi- tioner, you will need to work closely with your clients to perform a yearly review and adjustment of employees' salaries to ensure continued compli- a nce w it h t he a n nu a l autom at ic increase rule. I f states decide to update their salary threshold in response to the new proposed rules, you will need t o he l p e n s u r e y o u r c l ie nt s a r e comply i ng w it h t he h ig her m i n- imum salary requirement. In addi- tion to the points below, SurePayroll ofers some advice on how you can prepare for the potential changes. Changing an Employee from Non-Exempt to Exempt Most employees a re classi f ied as non-exempt, and very few will meet the requirements to be considered exempt. If your clients do have an employee whose classifcation needs to be changed from non-exempt to exempt, ma ke su re t he employee meets all the applicable exemption criteria: • Ensure compliance under federal and applicable state laws. Generally, exempt employees must be paid a predetermined salary, regardless of the quantity or quality of work per- formed. If you are unsure if a client's employee meets the minimum salary and duties requirements for an exemption, then he or she should remain as non-exempt. • If it is determined that an employee needs to be reclassifed, work with your clients to draf writen commu- nication that will be delivered to the impacted employee in advance. Te communication should explain the impact of the change, clearly stating the employee is not entitled to over- time pay, as well as any new proce- dures for timekeeping, absences or deductions in pay. • Remind your clients that they are limited in the types of deductions they may take from an exempt employee's salary. Most deductions are generally prohibited, but employers may make a deduction when an employee is absent for one or more full days for personal reasons or from the frst or last week of work if an employee did not work the full week. Changing an Employee from Exempt to Non- Exempt Occasionally, an employee will no longer meet the requirements for exempt classifcation and will need to be reclassifed as non-exempt. • Review employee classifcations regu- larly with your clients to determine which employees, if any, still qualify for the exemption. It's also a good practice for your clients to conduct a review anytime there is a change in an employee's job duties. If an exemption no longer applies, the employee should be reclassifed immediately and paid overtime in accordance with federal and state laws. • Make sure your clients communicate any change in exemption status in writing, and in advance when possible. Any communication should detail the impact of the change to the employee, as well as the potential benefts, such as receiving overtime pay for working more than 40 hours in a workweek. • Assist your clients in preparing FAQs to commonly asked questions the impacted employee(s) may have about timekeeping, benefts and other classifcation issues. What Should Your Clients Do Now? • If you and/or your clients have not already commented on the proposed rule changes, do so before September 4, 2015. • Take this time to rev iew exempt classifcations for all employees with your clients to ensure they still qualify under the current duties tests. • Assess the number of employees that could potentially be afected by the new rule changes and determine if your clients will need to: v R e c l a s s i f y t h e i m p a c t e d employees as non-exempt and pay t hem over t i me whenever t hey work more t ha n 4 0 hou rs i n a workweek; OR v Raise their salary to meet the new requirement. v Adjust the budget to account f o r s a l a r y i n c r e a s e s a n d /o r increased overtime costs. Time's Running Out to Comment on DOL Proposed Rules By Taija Jenkins, Associate Editor T he deadline is fast approaching to comment on Department of Labor's published proposed changes to over- time exemptions under the Fair Labor Standards Acts. Commenting is open to the public until September 4, 2015. Afer this time, the DOL will review the feedback to deter- mine what, if any, changes should be made. Any new rules will be published in 2016. For more information on the DOL proposed changes to over- time rules visit www.adp.com/ backtobiz. In addition, ADP is offering two webinars covering the latest information on the Affordable Care Act.