From: Staffing
Question of the Month: What are the new Fair Labor Standards Act (FLSA) rules for paying highly-compensated employees using incentive pay?
Answer: The FLSA regulations contain a special rule for highly-compensated employees (HCEs) who are paid a total annual compensation of $134,004 or more (as of December 1, 2016). A highly-compensated employee is deemed exempt under § 13(a)(1) of the FLSA if:
• The employee earns a total annual compensation of $134,004 or more, which includes at least $913 per week paid on a salary basis;
• The employee’s primary duty includes performing office or non-manual work; and
• The employee customarily and regularly performs at least one or more of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee. For example, an employee may qualify as an exempt highly-compensated executive if the employee customarily and regularly directs the work of two or more other employees, even though the employee does not meet all of the other requirements in the standard test for exemption as an executive.
To claim the HCE exemption under the final rule, these employees must be paid at least the standard salary level of $913 per week on a salary or fee basis, while the remainder of the total annual compensation may include commissions, nondiscretionary bonuses, and other nondiscretionary compensation. Total annual compensation under this definition does not include credit for board, lodging, health or life insurance, or contributions to retirement plans or other fringe benefits.
