You might have heard that the Department of Labor has updated its criteria as to who is eligible for overtime. This Final Rule updates the regulations for determining whether white collar salaried employees are exempt from the Fair Labor Standards Act's minimum wage and overtime pay protections. They are exempt if they are employed in a bona fide executive, administrative, or professional capacity, as those terms are defined in the Department of Labor's regulations at 29 CFR part 541. This exemption from the FLSA is sometimes referred to as the "white collar" or "EAP" exemption.
Here are the basics that you need to know.
Why was there a rule change?
On March 13, 2014, President Obama signed a Presidential Memorandum directing the Department to update and modernize the regulations defining which white collar workers are protected by the FLSA's minimum wage and overtime standards. The salary level test is supposed to help identify salaried workers who are entitled to overtime pay when they work long hours. The current salary level is outdated and no longer does its job of helping to separate salaried white collar employees who should get overtime pay for working extra hours from those who should be exempt. Through this Final Rule, the Department is updating these regulations to ensure that the FLSA's intended overtime protections are fully implemented, and to simplify the identification of overtime-eligible workers, thus making the exemption easier for employers and workers to understand and apply. These revisions will also help ensure that in the future the regulations continue to appropriately separate workers who are entitled to overtime protections and those who may be exempt.
Who is impacted?
To qualify for exemption, a white collar employee generally must:
- be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the "salary basis test");
- be paid more than a specified weekly salary level, which is $913 per week (the equivalent of $47,476 annually for a full-year worker) under this Final Rule (the "salary level test"); and
- primarily perform executive, administrative, or professional duties, as defined in the Department's regulations (the "duties test").
Certain employees are not subject to either the salary basis or salary level tests (for example, doctors, teachers, and lawyers). The Department's regulations also provide an exemption for certain highly compensated employees ("HCE") who earn above a higher total annual compensation level ($134,004 under this Final Rule) and satisfy a minimal duties test.
An easy to see who is impacted: Create an SAP report that looks at the following three criteria:
- be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the "salary basis test");
- be paid more than a specified weekly salary level, which is $913 per week (the equivalent of $47,476 annually for a full-year worker) under this Final Rule (the "salary level test"); and
- primarily perform executive, administrative, or professional duties, as defined in the Department's regulations (the "duties test")
I propose using the following as your data points:
- Identification of salaried can be accomplished via review of the default wage type for salaried on infotype 0008 (or depending on your Personnel Structure configuration you can use the Employee Group or Sub Group fields)
- Identification of meeting the threshold of $913 per week can be reviewed through the payroll result
- The Job Code classification can be identified by the EEO category store din the employees Infotype 1610
Reporting in SAP HCM is always a challenge with multiple solutions required to access the different pieces of data (master data, payroll results org management etc.). You can use those multiple solutions or custom ABAP or use a solution like EPI-Use Labs Query Manager to easily access the data.
To learn more about the regulation and its finer points please check out: https://www.dol.gov/whd/overtime/final2016/faq.htm#1.
