The Pennsylvania Department of Labor & Industry (L&I) announced on October 3, 2020 an update to the commonwealth’s minimum salary level for exempt employees which will eventually exceed federal levels. Employers must currently adhere to the national Fair Labor Standards Act regulations that took effect at the start of this year and raised the federal salary threshold to $35,568 annually or $684 per week.
On October 3, 2021, the threshold will rise to $780 per week and $40,560 per year, followed by an increase to $875 per week and $45,500 per year on October 3, 2022. In 2023, the wage threshold will automatically adjust every three years moving forward. Employers can include nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10 percent of this salary level. Read this employer fact sheet from L&I for more details.
This represents the first adjustment to Pennsylvania’s overtime rules in more than 40 years. RKL’s Human Capital Management team offers tips and action items to help employers prepare for compliance.
Four ways employers can prepare for PA overtime compliance
Determine exempt versus non-exempt employees
Under the Pennsylvania Minimum Wage Act Exemption, employers must pay employees at least $7.25 an hour and an overtime rate of 1.5 times regular hourly wage for hours worked beyond the standard 40-hour workweek. Employees who work in an executive, administrative or professional capacity may be ineligible for overtime. This determination is based on certain tests for salary and duties.
Use this checklist to determine whether employees can be exempt from overtime. Keep in mind that the highly compensated and computer exemption allowed at the federal level is not recognized in Pennsylvania.
Review job descriptions
When was the last time you updated your job descriptions? Review descriptions for all positions to make sure they reflect current duties accurately. Also, consider whether exempt employees are doing the work of non-exempt employees. If so, reclassify them as hourly.
Check exempt employee salaries
Review the salary amount (to include the 10 percent for other wage types identified as described earlier in this post) for all exempt employees to ensure the minimum threshold is being met.
Communicate with your employees
Make sure your employees understand Pennsylvania’s overtime rules and are prepared for the impact to their personal circumstances. L&I prepared a fact sheet to educate employees – view and download it here.