My desire is to keep church leaders informed of changes in law that impact the church.
You’ve probably heard by now, but in case you haven’t, as it relates to Salaried Employees, the Department of Labor has increased the Salary Threshold for which employers must pay overtime.
Effective December 1, 2016 the threshold increases from $23,660.00 to $47,476.00 annually. It needed to come up really, as hasn’t been updated since 2004. The new threshold is in the 40th percentile of salaries paid in the US. The DOL’s updated regulations also include a plan to automatically update the threshold every three years, based on wage growth over time.
How might this impact your church?
First, there’s probably two classifications of salaried employees in your church, in addition to hourly employees:
Salaried Non-Exempt and Salaried Exempt.
Salaried Non-Exempt (typically support staff) are employees that are NOT in a decision making role but earn a salary as opposed to being paid by the hour. However, hours worked over 40 in a given week are paid at time and a half. And, it doesn’t matter what their salary is, they must receive over-time pay for hours over 40 in a given week. So, there’s no impact for Salaried Non-Exempt employees as it relates to this new threshold.
Salaried Exempt (typically, those in a Director or Ministerial Role ) are employees IN decision making roles that are exempt from the overtime pay regulations IF their current base salary is over $23,660. Come December 1, to the extent their salary is under $47,476, they become subject to overtime pay.
Many church employees at the Director Level and above (Ministerial) are working more than 40 hours a week – week in and week out. Although, there is no specific exemption in the regulations for ministers, based upon case-law, there’s a long-standing ministerial exception to the Federal Labor Standards Act. So the assumption is ministers are exempt from this ruling, but it is not specifically stated that ministers are exempt. Stay tuned as we see how this plays out.
Back to those employees classified as Salaried Exempt that are not Ordained Ministers – to the extent their annual base salary is lower than $47,476, hours worked will have to be tracked and hours over 40 paid at time and a half.
If your church has any employees that are in this category, there are a few options:
A. Those that won’t increase your Staffing Budget (or that’d be the goal):
1. Track hours and manage to 40. Start now so work flow can be analyzed and adjustments made and in place before December 1
2. Lower their base pay and pay overtime. Let’s say they work 50 hours a week and hours worked cannot be lowered – lower the base pay so that base pay plus 10 hours a week at time and a half equals their previous salary
B. Those that will increase your Staffing Budget:
1. Increase their annual base salary to be above the new threshold
2. Pay overtime as incurred
Of course, to the extent you select either of the options that increase your staffing budget, you can always look to reduce other budget areas to offset the increase.
It’s worthy to note things you cannot do as ‘work-arounds’:
a. Offer comp time
b. Allow the employee to “volunteer” hours
c. Average hours
Just be sure to explain to your employees what’s going on and what you think is the best course of action for your church and them before changes are made.