Club Insider

Guide to Preparing for the FLSA Exempt Pay Changes

Month Two, Analyze Your Pay Plans

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Melissa KnowlesMelissa Knowles

Last month, we began the process of preparing for the FLSA Exempt Pay changes, announced by the DOL in May, by looking at your workforce and their duties. You can find that article and additional articles on the change on Club Insider's website (www.clubinsideronline.com/archives) or our website (www.gymhq.club). This month, we continue our preparation for the upcoming December 1st due date for compliance with a look at employee compensation.

The single biggest change for which owners need to prepare is the new salary minimum. The salary threshold increases from $455/week ($23,660 per year) to $913/week ($47,476 per year). If left alone with no changes to the current compensation plans beyond the required salary increase, an owner's exempt payroll will double! With payroll constituting one of the biggest expense categories for a business, this could have a major impact on the bottom line. Here are several considerations to make and examples to use while analyzing a business' current pay rates and retrofitting them to comply with the new DOL guidelines:

Calculate each exempt employee's total yearly earnings. You'll need to include all compensation including salary, commissions and bonuses.

Example: GM Johnny has a salary of $36,000 per year. He has a commission plan in place that pays him on any memberships sold by him directly, as well as a bonus structure based on achieving 100 new memberships per month. Looking at the six months he's been employed, it's established that his average monthly commission is $300 and his average bonus is $500. That gives him an estimated annual commission and bonuses payout of $9,600. So, Johnny's estimated annual income is $45,600.

If an employee's current base salary meets or exceeds $47,476, no changes need to be made. If the employee is close to the earning base stipulated by the new law ($47,476), consider making adjustments to their current compensation plan to bring it into compliance.

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