On May 18, 2016, the Department of Labor (DOL) updated the Fair Labor Standards Act and expanded overtime eligibility for millions of American workers by increasing the minimum salary employers must pay workers to maintain their exempt status. The new minimum salary level outlined in the DOL's Final Rule equates to roughly $913 per week, or $47,476 per year—more than double the previous exemption threshold of $23,660.

The new rules will take effect December 1, 2016. How will they impact your family office?

According to the DOL, this will effectively distinguish between employees who may meet the duties requirements of the white collar exemptions and those who likely do not, without necessitating a return to the more detailed ‘long’ duties test that existed before 2004. Experts estimate that the update to the minimum salary threshold will affect roughly 4.2 million workers, either through gaining overtime eligibility or a salary increase to meet the new threshold.

In some of my recent discussions about the changes, HR professionals have indicated several possible strategies that companies could use to soften the impact of the proposed increases to the salary test, including: 

• Increasing salaries of newly-classified non-exempt employees, if you assume the additional overtime pay they would receive will outweigh the cost of raising their salaries
• Maintaining current salaries and reclassifying the positions as non-exempt, assuming you can safely say the additional overtime pay would not bring the employee’s annual pay above the $47,476 threshold
• Reducing or maintaining hourly wages at current levels if the employee works on an hourly basis (without future hourly increases)
• Limiting the number of hours each employee works as much as possible so as to stay either at or below the 40 hour per week threshold

Most organizations have been aware for some time that the overtime protection rules were likely to change, but they were unsure of what the final rules would be and when they would take effect. At this point in the process, family offices would be prudent to consider strategic approaches to both comply with the new rules and minimize the effect on their bottom lines. A good start might beanalyzing the salaries of employees who may be affected by the final rule and forecast for increased salaries and overtime costs.

While devising your salary forecasts and strategies, there may be no better reference than the 2016 FOX Compensation and Benefits Survey. In exchange for completing the survey, you will receive compensation and benefits peer data that you can’t get anywhere else—compensation for 20+ staff positions, the latest trends in short- and long-term incentives, PTO policies, and much more. The survey closes on August 1, so please contact the FOX Research Team to learn more about participating.