Department of Labor Salary Threshold Increase
The U.S. Department of Labor recently announced new minimum salary levels for exempt employees that could make some ministry workers eligible for overtime.
An exempt employee is not subject to the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements. Exempt employees are usually paid a salary or fee; their salary is predetermined and doesn’t change based on their work quality or quantity. They often work in office or non-manual jobs, and their duties may include complex tasks that require them to work longer or inconsistent hours. Exempt employees may also be required to work as many hours as needed to fulfill their responsibilities.
Non-exempt employees must be paid minimum wage and compensated on the number of hours worked, including being paid overtime if they work more than 40 hours in a workweek. These employees typically engage in tasks that do not fall into the executive, professional, or administrative categories.
Effective July 1, 2024, the salary threshold for exempt employees will increase to $43,888 annually. Then, a second phase increase to $58,656 will be effective on January 1, 2025.
To determine if an employee is exempt from the rule the following three tests must be met. Numbers 1 and 2 are fairly straightforward, number 3 can be a bit tricky to determine. Employees who fail to meet all three of these tests generally must be considered non-exempt and must be paid minimum wage and overtime.
- Salary basis test: This test requires that an exempt employee be paid a salary.
- Salary level test: This test requires that an exempt employee be paid at least the FLSA minimum salary amounts ($43,888 on July 1st, $58,656 on Jan 1, 2025).
- Primary duties test: This test requires that an exempt employee typically perform executive, administrative, professional, or creative professional job duties.
As you can see, test three has a bit of subjectivity to it. Fact Sheet #17A published by the Wage and Hour Division of the U.S. Department of Labor provides more specifics on these categories.
What To Do With This Information?
- Clergy/ministerial positions are not subject to the FLSA. As such, no further action is necessary for this population.
- This might be a good time to review exempt and non-exempt classifications for your employees working at the church.
- For exempt employees who do not meet the new minimum salary thresholds, consider taking one of the following steps:
- Move salary up to the minimum salary threshold by the effective dates above.
- Change the employee to non-exempt, subject to overtime earnings.
This can be a confusing topic to administer, but an important one to get right. If you have any questions or would like assistance with any of this information, don’t hesitate to get in touch with me.
Scott Thorson