FLSA Minimum Salary for Exempt Employees 2016

All right. Good afternoon, everybody. As I just mentioned, I've got everybody on mute, so we'll save the Q&A for the end just to avoid any interference or noise coming from everybody's office. But appreciate you guys taking the time to join me this afternoon. My name is Matt Vaadi. I'm with ERG Payroll and HR here out of Columbia. We're going to talk about the updates to the Fair Labor Standards Act going into effect December 1st, 2016. First, I'm going to give you guys a little bit of background on me and why this topic is interesting and important to me beyond the obvious reasons. But for those of you that don't know me that are on the line, as mentioned, I'm the owner and president of ERG Payroll and HR. We're headquartered here in Columbia, South Carolina. We'll talk about these updates in a little bit, but you know, I'll save the commercial about our organization. But we work with small businesses, helping them to maintain compliance with payroll and HR regulations. And reduce the administrative burden associated with those tasks. And most importantly, try to create an awesome place to work. And we're going to talk about some of the ways that you can make sure this does not have a negative impact on your team and use it as an opportunity to make your place even better to work than it is today. So, a little bit of background on me. There's a picture of me from college for those of you that do know me. About 13 years ago, I was— I left school and I took a job as a bar manager. This was my first job out of college and my first real what I would consider HR type of role. I had 20 to 30 direct reports. I did all of the hiring and firing. I took inventory, did the ordering, you know, disciplinary processes with my employees. It was the first ever handbook I ever wrote. It was a lot of responsibility for for me at that age. And I had all the responsibilities you expect for a manager in a small business that really didn't have any internal HR infrastructure. And there were a lot of challenges that came with that. I worked doubles nearly every day. It ranged 12 to 16 hours. Those of you that have ever worked in the restaurant industry are familiar with how that whole thing goes. Long hours, people at your place of work are drinking, which always makes things more interesting than a normal job. If people are drinking at your job today, that's probably, I don't think I saw anybody join from a restaurant on here. So, uh, if they're drinking today at work, you probably have a whole nother HR conversation to have. But, you know, I had all the fun stuff that you'd have to do in a restaurant, covering other people's shifts, working holidays, working, uh, you know, your family's birthdays, all any special events you'd never get to go. It was a tough gig, but I was paid awesome. So I didn't really care. I made $25,000 a year. And I was allowed to tend bar 2 nights a week, which increased my pay by about $10,000. So I was pretty much killing it at the time. And, you know, the problem was one day I sat down and I started doing the math on that, and I realized that, you know, if I'm working 60 hours a week and I'm making $35,000 a year, and you start to calculate overtime into that, man, I'm only making $8, $9 an hour when I start to work out a 60 to 70 hour week. And went from flipping bottles Tom Cruise to flipping the bird Tom Cruise pretty quick. And so I say all that really just to say this: that was 13 years ago, and the minimum salary requirement that I fell into at that time where I could make $25,000 in a management leadership role, it hasn't changed since that time. So change was due. Uh, you know, you will— we'll talk about the merit of whether or not the rates should be doubled and what those rates are. But, you know, I do just want to make that point. The cost of living has gone up more than 30% in that time. Today, $23,660 a year, which is the current minimum salary requirement for an exempt employee, it's actually below the federal poverty line for a family of 4. And people, particularly in industries like restaurants, service, you know, they aren't entitled to overtime pay because they're considered managers and they have all these responsibilities and they still, they just don't get paid very well. So Reform was needed, and we'll talk about some of the background of how we got to where they are. But one other thing that has occurred in those last 13 to 14 years that's also important to note is that the FLSA lawsuits have tripled— or excuse me, quadrupled in that time, and the Department of Labor has hired significant resources to investigate companies that have compliance with these issues. So today we are— once again, my name is Matt Vaadi. And if you have any questions walking away from this, you just want to connect with me, it's matt@ergpayroll.com or @MattVaadi on Twitter where we're always dropping a lot of good HR tips. For those of you— I see a lot of you have been subscribing to the newsletter as well. Tons of great free HR templates and things on ergpayroll.com. So agenda for today, we're going to talk about the changes, what they are. How they will impact you and your organization, and how you can implement a strategy to move forward with the changes in a fashion that's best for you and your team. Then we'll talk a little bit about what I call special bonus strategy. So what are companies doing to take this to the next level and really leverage the opportunity to make their organization better? So first, what is the Fair Labor Standards Act? Fair Labor Standards Act is something I spent more time than I probably have ever imagined in my life. If you go back 13 years ago there to Tom Cruise behind the bar and told me that today I would have spent so many hours studying the Fair Labor Standards Act, I never would have believed you. But in 1938, at one of his infamous fireside chats, FDR announcing strong support for the FLSA. And really what they were trying to accomplish was creating a minimum wage. I often ask if we're doing this presentation in front of a group, what do you think the first initial minimum wage was in 1938? It was 25 cents an hour. And it also, you know, the second point is it made overtime any hours over 44 hours in a week at the time. It was not the 40-hour workweek that we're accustomed to today. It started out as a 44-hour workweek before for overtime, and then enacted child labor laws. But the one thing you have to just keep in mind here is this— we're coming out of the Great Depression at this time in American history. The underlying theme, the whole reason there was all this support and hoopla around it, was it was just really meant to create jobs. If you look at each of these things, if employers are forced to have an overtime and this guy who was working 80 hours a week now gets paid time and a half after 44 hours, then Obviously we're going to hire a second person to do that job rather than pay this individual. So the Fair Labor Standards Act, what was a, both an economic boon and political move at the same time back in 1938 to get things rolling. But one of the things that was brought about in 2004 are what we call white-collar exemptions to the Fair Labor Standards Act. And so we aren't going to dive real deep into these today, I think everybody who's on this call should have gotten an email with a link to our YouTube video of a prior webinar where we cover each of these exemptions in detail. If you're watching the recording of this, then just go to YouTube and search exempt versus non-exempt. We'll be one of the top 3 or 4 hits that comes up in there. And you can check out our video on that. I think it's about 17 minutes long and we walk through each of these exemptions in great detail. However, I will say that the salary basis will obviously have changed by the time you watch this recording, being that it's October 2016 right now. So these 5 collar exemptions— I will never miss an opportunity, however, to address the executive and administrative exemptions because they are probably the most abused exemptions from minimum wage and overtime as it relates to the Fair Labor Standards Act. So executive exemption is one where An executive— so there are two parts to whether or not you meet the exemption from the Fair Labor Standards Act minimum salary and overtime requirements. Excuse me. You have to— you are required to meet a certain salary, which today is $23,660 a year, scheduled to change. We'll talk about those numbers in just a minute. And secondarily, there's a duties test assigned to each of these exemptions as well. And the salary changes slightly for computer personnel and outside sales. But so for the executive role, one of the tricks with this is as an executive, you, you must have at least 2 full-time employees reporting to you, and you also have to have spent the bulk of your time focusing on management of the business or division of the business. So the people that I see that kind of get tucked into this executive exemption that might not be our controller-level type of folks, um, you just might want to look at this and reclassify. Once again, go back to that other video. It's going to go into more detail. And then the administrative exemption as well. So this, this one is, is one where you're not going to get the Department of Labor necessarily coming in and auditing you and identifying that somebody was misclassified under the administrative exemption. You're gonna get a lot more of that sort of Tom Cruise moment from the beginning of the video where we, where somebody realizes, oh geez, wait a minute, I'm working 50, 60 hours a week and I'm only getting paid $35,000 a year. Am I really an exempt employee or should I be getting paid overtime? And they start to realize that they might not fall on this administrative exemption. And some of the things, you know, the employee's primary duty to fit into this category has to include the exercise of discretion and independent judgment with respect to matters of significance. So think more operations type people and less front desk or admin assistant type of people, right? So they have to operate independent judgment-making abilities in the course of their job. Like I said, not going to spend a lot of time on who's exempt because that's not the point of the call today. But one thing also, the outside sales is not impacted by this ruling. The salary requirements remain staying there. And the sort of not on the screen exemption are highly compensated employees, which we'll talk about in just a second. They— the number is going from $100,000 a year to be considered a highly compensated employee. That's going to raise as well. So let's look at this by the numbers. So in, I guess it was 2013, President Obama came to the Department of Labor. He said the Fair Labor Standards Act is outdated. It needs to be updated for the times. And everybody took that for exactly what it meant, and he meant that the salary levels for exempt employees need to be increased. Because going back to our earlier point, at $23,000-$24,000 a year, it's just not a realistic salary level. So we all saw the writing on the wall, and of course some of these changes have been submitted and reviewed over the last couple years. And in May of this year, the new ruling came out that the salary threshold is going to increase from $23,660 to $47,476. So that's more than double. So once again, now if you've got an employee that you want to have classified as exempt from overtime and obviously minimum wage, they will be above based on this wage, but they have to make a minimum salary of $47,000 $476 a year. So that's a pretty substantial increase. And where this number came from, contrary to popular belief that it was pulled out of thin air, which is usually the response I get when I ask where people think it came from, this is based on the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage census region, which is currently the South. So There is a point of contention there where if you're saying to yourself, I can't believe this, this is raised so high, 47,476, this is insane. You have to think about what the exemptions, quote-unquote, white-collar exemptions are for. They're for leadership and management type of roles inside of the organization. So we challenge people to think differently when saying, well, geez, why is this so high? Conversely, you could ask yourself, why am I not paying people in my organization that I consider to be leaders and and executive-level types of folks, this minimum salary requirement. So, there's two schools of thought there. And this is probably a really good time to hit pause and say, guess what? I'm not just telling you guys this in theory and, you know, what could— just thinking about it from an HR consultant standpoint. I'm a small business owner. I've got members of my team that were impacted by this. And I've had to make these same decisions that I'm going to guide you through today. So I'm not going to talk to you from my high and mighty chair about what you should and shouldn't do. I was doing the same thing. And guess what? I did not bump these individuals up to 47, 476. I took a different route. So I'll talk through some of what I did and we can talk about what might make sense for your organization. So conservative estimates, I almost always run the low end when making estimates. I've seen a couple of different numbers, whether it be 4.2 million workers affected seen it as high as 7.5 million workers affected. A lot of people, right? You know that or you wouldn't be on the call. And then 64% of businesses, but I think this number is actually low based on the fact that really anybody I've seen with more than 5 employees, a really high percentage of companies with more than 5 people have been impacted. So once again, the number that's not on here is highly compensated employees. Their number is going to raise from $100,000 to $134,000 a year. And so the other piece of this is these are going to increase every 3 years starting in 2020 in January. So we're gonna— the good news on that is it's going to be predictable. So in 2019, we're going to know what the increase will be in 2020, right? So if it's going to be $49,216, we'll know that by 2019 because it's relatively predictable and we'll have to have those numbers well ahead of time. So automatic updates every 3 years going forward. And for those of you just saying, oh yeah, this isn't going to happen, I would find it highly unlikely that anything derails the rollout of this and the continued escalation of it going forward. Maybe some potential delay at some point here in the short term, but I, we're kind of in the 11th hour, so unlikely, I would guess, at this point. Certainly too late to bet on it. All right, so one other piece of this, uh, one piece that wasn't in the initial draft that we're really excited to see come out in the final ruling is that 10% of that $47,000 $47,500, I'm going to call it going forward. I'm just going to shorthand it down to $47,500, uh, can be non-discretionary bonuses. So what are non-discretionary bonuses? Think commissions, incentive-based pay that's linked to metrics. Uh, we have clients in the staffing industry that really fit this bill well. So if you think about recruiters, they typically have a base salary plus commission, and the on-target earnings might be $60,000 a year. And so they were hopeful that they didn't have to take them from a $40,000 base salary to a $47,000 base salary. They go, "Wow, they can remove that 10% off the top and increase that salary up to, you know, the $43,000-ish to get them close to that." And then they can rely on their commission plan to help make up this other 10%. Now, where this isn't a great fit is if you've got somebody that you're just trying to bump up to $47,500. You say, "You know what? I'll just make 10% of that." incentives and bonuses, because the sort of fine print on this is that you're going to have to pay this out quarterly regardless. So if somebody misses their bonus for the quarter, then you've got to pay them anyway, and that's the least frequently you can. The hope would be that you would pay them more often than quarterly on this stuff. So not really a great fit if you're just trying to sneak up to that line, because you're going to kind of create a scenario where maybe after 2 quarters somebody realizes Oh, I'm going to get this 10% either way. You've got to look at, are you going to discipline the employee up to potentially termination for not meeting their numbers? But those are the types of roles you can think about where it makes a lot of sense. And the compensation plans where it makes a lot of sense are metric-driven incentives. The compensation that's not included in this 10% would be things like discretionary bonuses. Hey, it's year-end. We had a great year. You guys are each getting a bonus. Any gifts you give to your employees, tuition or loan forgiveness, vacation, sick, holiday, PTO, none of that stuff. No profit sharing, no 401, no benefit contributions. None of that stuff's going to count in this. So hopefully that makes sense. All right. I do like to stop here and just ask, you know, what do all these companies have in common as it relates to their American employees? We are all subject to the same regulation. So that's the one piece of this that I like to kind of make sure everybody's on the same page. Look, we're all playing the same deck of cards here. Nobody's got any unique answers when it comes to what we're going to do, although we all have different unique circumstances. But it is what it is. Let's buckle up. Let's make the best out of it. And let's try to turn it into a positive thing instead of a negative. So here's the process we look at, and there's a really good breakdown of this in the assets that were distributed to those of you that are on the webinar. And for those of you that are not and watching this recording, there'll be a page coming up where you can go and find those on our website. But first, you want to identify who in the organization has been impacted by the updates. Then you want to analyze a host of different metrics and policies inside the organization. And decide what are you going to do to go forward and meet these regulations and also set yourself up for success in the future as these continue to change. So let's look at the first piece. Let's identify who. I think that the one thing that is maybe not as obvious in this scenario is running— of course you're going to look at anybody who makes less than $47,500 a year. That's very obvious, right? What I would urge you to do is pick that bar up to $52,000, $53,000 a year because you really want to avoid wage compression. So, I could have made this even more obvious had I moved Jan down $48,000 a year. But if I take Michael and Jim, who are regional managers, and I give them raises to get above the salary threshold and Jan is the regional vice president, now they've just— come within $1,500 annually of her compensation where we were trying to keep a gap there for an obvious career path of moving up the chain. Whereas all that responsibility that Jan has for only $1,500 more a year, who would want that role, right? So, and also you have other considerations that come into play when you're looking at wage consideration as far as are you discriminating against certain classes and are you creating morale issues amongst employees or just a, plethora of issues that can occur there. So make sure you're getting a whole, a big picture view when you look at who is going to be impacted on this. We're going to come back to these guys in just a little while, Jim and Michael and Jan. But so you're thinking about who, make sure you expand it up. And next, if you haven't started communicating to people already that there is going to be some form of change and what has happened, you need to get on the ball because the bottom line is they already probably know So if I make $42,000 a year today, I have likely heard on the news or from somebody else, one of my friends or Facebook, that changes are coming, and I might be under the impression that I'm getting a raise to $47,476 a year. And if you haven't told me otherwise, then I don't really know what to think. So we'll talk about how that conversation should look in just a minute, but I would urge those of you that have not had the conversation to begin, begin writing a rough draft for that as soon as we hang up the phone. All right, so let's just kind of look real quick at my amazing pie chart skills. First of all, and yes, I am for hire if you need a graphic designer who can make pie charts. This is the projected effect on currently exempt employees. So First of all, 60% of exempt employees don't even work overtime at all. So just wipe them right off the table, 6 out of 10. And then another 2 out of 10 only occasionally work overtime. So they're not really big culprits. We can probably squash a lot of that with just, hey, overtime only when approved with minimal financial impact. Now we've got the 20% of our exempt employees who regularly work overtime. So as usual, the 80/20 rule is in effect, right? The 20% of the people, create 80% of the work that we have to do, or 20% of our clients create 80% of the income. We've kind of got that going on here, right? But it's one way to keep it in perspective that this is not all-encompassing, so let's make sure we don't make it that way. So we've identified who in the organization are in that 20% that are going to be impacted by it, and now what do we need to do with those employees? So The first thing you need to do is start to get a feel for how much do they actually work. So where do they fit in there? Do they regularly work overtime? Do they not work overtime at all? Do they work a ton of overtime? I'll be willing to bet you really have no clue until you start tracking their hours. And I'm speaking from experience. There were members of my team where I thought, like, man, they're here 50, 60 hours a week. It's amazing, they never stopped working. And we started tracking the hours and no, it was 43, 44, 45. It was, it's just sort of a matter of not really ever having to track the information before. So your window is getting tight. We'll talk about that in just a second here. But you need to try to get some sense of the hours that these individuals are working. Because the thing is, when we get into step 2 here of running the numbers, you're going to really have 2 different ways to look at the numbers. You can look at a, what I would call, cost-neutral versus a current salary approach. So, the current salary approach is if I work— if I make $40,000 a year, you're just going to divide $40,000 by 2,080 hours a year and pay me that hourly rate. And that's that. We move on. And if I worked over 40, then I would make more than $40,000 a year. If I work less than 40 hours a week, then I would make less than $40,000 a year. And that's kind of the mindset a lot of people are in right now where they're saying, oh geez, if I, if Jimmy works 50 hours a week and I up his, and I give him the rate of exactly $40,000 a year, then when he works overtime, I'm gonna wind up paying this guy $45,000 a year. You don't necessarily have to do that. You can look at it from the cost-neutral approach as well, which says that, okay, let's go back to our example. Of Mike and Jim. So let's say Michael worked 40 hours a week and Jim worked 60 hours a week. So Jim at 60 hours a week in the cost-neutral approach, we would divide his annual salary by the equivalent of 40 hours of regular time per week and 20 hours of overtime per week. So we would take that into the calculation. So whereas Michael would make $19-ish an hour, Jim's rate would be beneath that because he was working— we're putting them both on a cost-neutral approach where it's based on the hours that they currently work. Now, I would never suggest that you base off of 60 hours. I don't think that's realistic. Do people work 60 hours every week? Yes, I am likely one of them, but I do not think that that is fair way to base an exempt employee's salary, or excuse me, to break down into the hourly rate. Which is going to influence your decision. I understand that, but that's just not creating a great work environment. But you can, however, bring it down to say, especially if you're a proactive employer and you've had the conversation when you hired somebody and you said, look, this is a 50-hour-a-week job, that's why we're paying you a $40,000 a year salary, these are your expectations, these are when you should be working, et cetera, et cetera, then it's well within your rights. Say, for 50 hours a week, you're going to make 40 grand. And that includes 10 hours of overtime. And it's probably a good time to start talking about how that conversation should look. If you leave this call with one thing today, leave knowing that you need to make this conversation as positive as humanly possible. If you walk in with your sort of political baggage on your arm or your woe is us as an employer, I'm going to tell you right now, your employee just doesn't care. Right? Like, they don't feel bad for you that you have more administrative duties. They don't care that your labor costs are going to be fluctuating. They care about themselves and what's going to impact them. And so, if your negative attitude is only going to make it more negative for them, whereas there could be a whole bunch of other things that make them think this is negative. So, you've got to try to put the positives on this and make it a positive thing by keeping, you know, look, we're going to keep you whole. We're going to make sure you get paid what you've always gotten paid. We're going to make sure that this is a positive thing for you. We're going to try to allow you flexibility in your schedule where you used to have it. Whatever those things were that they used to have, try to make sure nothing is taken away from them and make sure that this is not a stigma of no longer being exempt and now they're not exempt if that's the route you take. But I can't, can't, can't, can't stress that enough how positive that conversation needs to be. So take a few minutes. Sketch out an outline of what you want that conversation to look like. Each conversation, the first one that you make them aware that change is coming, and the one that you tell them what the changes are officially going to be, make sure they're very positive. Sorry, I'll get off that soapbox. Well, I'll probably get back up on it, but anyhow, so you run the numbers. So once again, if somebody's working 60 hours a week, somebody's working 40, we'll talk about this in the impact. So if I've got two people, Jim and Michael, are making $44,000 a year and one works 60 and one works 40. What if the guy who works 60 hours a week has been there for 6 years and the guy who works 40 hours a week has been there for a year and a half? Am I supposed to pay the guy that's been there for 6 years a lesser hourly rate than the guy that's been there for a year and a half all because he works more hours in a week? Man, that doesn't sound right to me. So you're going to have to This is where I hit pause and I start to look at the opportunity here, and I say, we probably should do a job analysis and see how these guys are spending their time each week. What exactly are they doing, and what are they doing differently? So if one person's doing 60 hours worth of work in a week, does that mean he operates inefficiently? Does it mean he's doing things that should not be part of his job? I have to know that. I have to know where this time is going, if he's doing the job that he's supposed to to do for 60 hours a week, then why is one doing it for 60 and one doing it for 40? So take a step back, do a job analysis, and start to look at more than just face value on this, because it could be a time where we have to evaluate all the positions in our organization, what our org chart even looks like, to make— to really just once again turn this into something that's going to help our organization rather than hinder it. And then finally, on the analysis piece, review the total compensation. So, had a client, had a person working for them that was making about $43,000 a year. They're contributing to the 401, they're paying more for the benefits than the average employer is. And at the end of the day, all they had to do is restructure their— what they were contributing to the employee's HSA, what they were contributing towards the 401, and they had the $4,500 that they needed that they could reallocate towards base salary instead of towards those particular benefits, and they didn't have to make any move. They— and really it was a cost-neutral effect for them, and that total compensation was out there. Had other clients where they were paying for a cell phone, paying for a car allowance, paying for, you know, different benefits. Once again, look at all those pieces and see if some money can be reallocated towards base salary rather than towards the benefits or other compensation. All right. So the final part, you want to decide exactly how you're going to move forward. So you really got 4 options. I'd say 3 and 4 are similar. But the first is reclassify the individual. So the very obvious reclassification that people are going with is saying, okay, You make $40,000 a year, you know we're close, I don't have those other pieces to update your compensation. I'm going to reclassify you as non-exempt, start to pay you hourly based on a wage of whether that's cost neutral or whether that's, you know, based on your actual salary. We're going to start paying you hourly and tracking your hours, and that's very simple. But going back to kind of where we're at today, You've got to take the time right now to start tracking hours walking away from this call and take 2 weeks to track them and give yourself some sort of a benchmark that you have to work off of if you're going to take this route and you haven't done anything yet today. I would suggest 30 days if you had it, but at this point you don't. So then you could take some potentially temporary movement to, to edify that. So reclassification, non-exempt is a very obvious one. Where this is the bulk of the decision that is happening. We've seen many of our clients are taking individuals, if they're not close, I'm just going to reclassify them as a non-exempt. I've got a good feel for how many hours they work in a week. Now I've got to evaluate all of my internal policies as a result of that, my off-the-clock work policy. So should you be taking calls after hours? You know, should you be looking at emails? No, you need to have a policy in place that dictates when, how people work. BYOD policy is something, bring your own device. So, you may want to start to get an understanding around it. If your employees typically check work emails on their personal phones, you're going to want to have a policy around when and how that should be done. Meal and rest policies, once again, if people were coming and going as they please, I go take an hour and a half lunch today because I'm exempt and you know that I'm going to be answering emails at 10 o'clock at night every night. We've got to look at that and say, what are the meal and rest policies? Overtime policy is a very obvious one. Most organizations are going towards the, the overtime requires approval route, even if they regularly work overtime. This just helps have a policy in place that allows you to manage that process a little bit more efficiently. And then travel time policies, we'll talk about a little bit more in just a moment. So make sure you're looking at each of those policies if you're reclassifying individuals because than at least updating what you already have on the books. One of the other reclassification options that is probably less used, but personally it's the route we took at our organization and I've had several clients that it was the right route for them, and that is the salaried nonexempt route. So that takes, let's just say, let's use Jim as an example. Jim, in our example, he worked 60 hours a week made $44,000 a year. So you know what, Jim, you were due for a raise. This is a really bad example. Michael might be the better example. He works 40 hours a week regularly, makes that $44,000 a year. I don't want him to make less than $44,000 a year. I know I'm still gonna have to track his time. I really don't want to give him the $3,500 a year raise either, so I'm gonna make him salary non-exempt. So if he works 38 hours, he still gets his weekly equivalent. $44,000 a year. If he works 42 hours in a week, I owe him 2 hours of overtime. So it doesn't stop me from owing overtime, but what it does is helps me to sort of get some stability to my labor costs. I mean, I'm— a lot of you are probably like me. I actually saw it in some of the concerns that you guys answered when you filled out the survey to jump on here. You know, you worry about labor costs fluctuating and jumping up and down. Having a good overtime policy in place and putting in a salary non-exempt program is a good way to manage a percentage of that labor cost, right? So if you can find people that are worldly working 40 hours a week in the first place, and you want to make sure that you're, you're doing everything you can to make this change as positive as possible, it's a really good route to take. Next, raise wages. So I think this makes sense in the circumstance you've got somebody who's at $45,000, $46,000 a year or somewhere within that range, or we're looking at the option that we talked about earlier where I've got other compensation on the table, I can rearrange for this individual and move that around, I raise the wages. But the one thing I will say here is that when you raise somebody's wages, there should be increased expectations for that raise in wages. So does that mean that person takes on more responsibility? Does that mean that that person, you know, the expectation as far as hours— going back to Michael, if he was only working 40 hours a week, is the expectation now that he's going to put in a few 2 extra hours of overtime per week because we have things that we need him to do. So the job analysis is really going to help you there. You've got somebody who's, you know, working 40, 50, 60 hours a week. What are they spending their time doing? Is it the— are they the most important things that are benefiting the organization? So I can't stress the job analysis process enough. If you have any questions on how to execute that, don't hesitate to reach out after the call. And finally, adding employees. Now this, this doesn't make sense very— I mean, it makes sense if you have folks working 70, 80 hours a week, or if you've got multiple people working 20-ish hours of overtime and you can just plug in one more person in that role and eliminate some of that overtime. The people weren't making, you know, they're making $30,000 to $40,000, they're not making close to the wage, new minimum salary requirement, adding employees could make sense based on— I'd say it makes more sense when you either have a lot of people working overtime or you have a couple people working a lot of overtime. And then outsourcing. So going back to the job analysis, if you find that, you know, you've got people that are doing things that really could be done more efficiently by being handled by a third party or being automated, then you need to look at what you can do to get them focused on the right task for your company. So these are, these are your options. Let's look, let's look at the potential impact of some of those changes. And for those of you that are not joining us live for this call, you go to ergpayroll.com/flsa-changes. We've got 3 free guides out there: the decision-making guide, an implementation guide, and an exempt versus non-exempt checklist for you. So ergpayroll.com/flsa-changes. All right, impact. So the first impact is going to be the obvious, you know, some of you alluded to it in the comments, the administrative burden. How am I going to track hours for people? I've got a full white-collar staff of people that are all salaried today and now I've got to start tracking hours. How do I do that? Or I've got a staff full of people where, you know, this is going to impact a large group of people that payroll did not used to have to track hours for and now we have to track hours. So Be aware of it, plan for it, look at options out there. And I'd be remiss if I didn't mention, of course, ERG Payroll. We sell an online timekeeping system that also comes with a mobile app where your employees can clock in and out from wherever they are. And you can see GPS timestamp where they clocked in and out from for those of you with mobile workers as well. So, not meant to really get into that, but definitely something to consider. Morale. Once again, you need to be careful and have tact in how you approach this. This is why you are a leader. You are the positive messenger who's going to bring this to the employee and make sure that they are aware that it is not a negative thing about them or their performance or their role or what they've done for the organization. This is strictly the card you've been dealt, and you are going to do what's best for them and make sure that they continue to be treated as a valuable member of the team. Inconsistency. So going back to Jim and Michael, one guy's working 40 hours a week, one guy's working 60 hours a week. Now that's gonna create inconsistency in wages. What if one of them we decide, okay, well, he's already working 60, I'm just gonna give him the $3,500 'cause he's doing a bang-up job. And now he's exempt still and the other individual is not exempt because I'm gonna treat him hourly. That is an option, you can do that, there's nothing wrong with that, but you have to understand the potential impact it could have on morale and on the role moving forward and how that role is defined. Customer service. Now this, this was— this one hits close to home. Big concern for me is if I say, yeah, now I'm going to have to pay people hourly, and we are a small business, we service our clients after hours, before hours, we're taking calls and emails late at night all the time. It happens. And so what do I Do I really want to have to pay overtime on those hours, or do I want my service to slip? I've got a decision to make, right? And I've got policies that I need to put in place and understand how that's going to impact the experience of our clientele. And so, you know, that's something that we had to think long and hard about and make sure that we have those safeguards in place when we made our changes. And then, of course, employee development. I mean, once again, this is what I think about where Will you send somebody to that all-day learning event locally, a seminar, a great seminar like the ERG Executive Summit coming up next month, or will you send them to the, you know, out-of-town conference where you're going to have to have a strict travel and pay policy, whereas before, you know, it might not have been as big of a deal for an exempt employee. So you have to make sure that you've got learning tracks in place and Don't let budget completely dictate the development of an employee. And also, of course, those career paths. I mean, some of our clients are looking at eliminating some of the management positions and streamlining what that path looks like and more associate-level positions. So, it's going to, in the short term, eliminate some potential opportunity for growth in an organization. These are things that are going to happen. All right, so as promised, the bonus strategy. I talked about it earlier. I would use the blank slate approach, and I think this backdrop is, is applicable here. So if we were going to restructure the organization today and start over with fresh jobs, would they look exactly like they look today? Many of us as employers are not too big to think this way, right? Some of you on the phone may have hundreds of employees Some of you may have 30, 40, some of you might have 10. If you've— it really anywhere along that line, you can look at different departments or you can look at your entire organization and say, is our strategy today, if we were going to bring our team to market from scratch, would it look exactly like it is? So some of the things you can do to evaluate that is first, start with that job analysis. Are people doing what we expect them to be doing? Then does the job description align with what the job analysis actually says this individual is doing? And now we keep working right up the chain. So do our job postings align with the job description, which is what the individual actually does? We determine after a job analysis. And when we're hiring, are we interviewing and asking questions that apply to the role? And does the hiring manager understand what the person actually does during a day? And then are we measuring performance based on all of these criteria? So find that complete synergy across the role in an organization. It's only fair to you and only fair to your team. So this is a great, great, great excuse to take a step back and do that, because there are very few things in our business that are going to cause us to do so other than an event like this. So don't hesitate to be strategic about these types of moves. So hopefully that was helpful. You've got some action items walking out of this call today. You've got to identify those impacted. I'm certain everybody on the phone has already at least picked up to that 47.5 and identified there. You've got to analyze all those different factors we talked about, total compensation, how many hours in a workweek somebody works, what their pay is, how many other people are in that role, what our policies are. You've got to know all that stuff front and back and make a decision. You don't have much time now. And one point I will make, I had this in my notes for earlier, but December 1st is a Thursday. If your payday is December 2nd by any chance, or the 1st if you're monthly or semi-monthly, and that maybe is your payday, you really only got a couple weeks here to make a decision because if you're biweekly, December 2nd is your payday, the pay period likely starts on the 13th of November. So, yeah, you're looking at about 2 weeks. So definitely want to keep things moving forward here. Make your decision and then update your policies and procedures to reflect your changes. And, you know, we've got a lot of great templates and for most of our clientele that are on our Executive Payroll and HR platform, we've gone through and updated these policies and procedures for them on their behalf because that's what we do for our fully outsourced clients. And look, I promised this would be relatively quick. It wasn't. We're at 43 minutes, but it didn't take an hour, so that's something. I like to always end with this quote: "95% of my assets drive out the gate every evening. It's my job to maintain a work environment that keeps those people coming back every morning." Once again, the people that you're talking to, the people that are impacted by this, they are assets of your organization. You cannot forget that when making these decisions. You have to make sure that you are protecting them as much as you're protecting the organization because they are your assets. So once again, I'm Matt Vaadi with ERG Payroll and HR. Most companies turn to us because they're looking for a single partner that can help them to maintain compliance and be a better employer on the payroll and HR front. Our tagline is payroll with a purpose because we donate 3% of all revenue to local nonprofits local to our clients. Through our partner donorschoose.org and several local charities here in Columbia, South Carolina. But I thank everybody for joining us. I'm going to open up the line right now for a little Q&A if anybody has anything they want to chime in with. All right, you are all unmuted, so if you don't want to be, then mute yourself. Alright, last call. Any questions? Well, thank you all so much. That means I either covered way too much or you're just shy, but I appreciate it either way. And once again, you can hit me with an email at matt@ergpayroll.com if you have any questions, and I appreciate you taking the time to join us today. Thanks.