Extra Pay Periods Throw Off the Salary Threshold

The salary threshold for an exempt position is a weekly requirement, not an annual one.

Extra Pay Period Salary Threshold (1)

As we reported in an earlier HR enews there are a number of regulatory changes that will be taking effect shortly, including increases to the exempt/non-exempt salary thresholds. In addition to the salary thresholds increasing, some employers may be preparing for an extra pay period in 2020. But what if you’re an employer with 53 or 27 pay periods in 2020 AND have employees whose weekly earnings are at the salary threshold?

Suppose you have an employee who is exempt from overtime under either the executive or administrative exemption and earns the minimum salary threshold of $885 per week. In a year with 52 or 26 pay periods, the employee would receive an annual salary of $46,020. So if you have 53 or 27 pay periods, you can take that annual figure of $46,020 and simply divide by the larger number of pay periods, right?

WRONG.

Dividing the $46,020 figure by 53 rather than 52 results in weekly compensation of $868.30, not $885.

The salary threshold for an exempt position is a weekly requirement, not an annual one, so as an employer you must be sure each executive/administrative exempt employee receives $885 per week. For the professional exemption the threshold is $684 per week.

If you are an unsure if an employee meets either the duties test for an exemption from overtime or the salary threshold please use the link below to contact us with the details and we will assist you in making your determination.

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