It depends on which option you choose and how many hours your exempt employees typically work per week.
If you raise employees' salaries to meet the new requirement, your compensation costs will increase.
40 hours per week schedule:
If the potentially impacted employees rarely work more than 40 hours in a week and you don't want to increase your compensation costs, you could reclassify these employees as non-exempt and convert their salary to an hourly wage (divide their weekly salary by 40 hours). These employees would be entitled to overtime if they work more than 40 hours in a workweek.
40+ hour per week schedule:
If the potentially impacted employees regularly work more than 40 hours per week and you want to keep your compensation costs the same, then you would need to account for the overtime premium.
Example of Cost-Neutral Option:
An exempt employee's current salary is $550 per week, the employee regularly works 50 hours per week, and you want to reclassify this employee as a non-exempt employee but keep your costs the same. You would calculate the cost-neutral hourly wage as follows:
|$550 weekly salary
[40 hours + (10 overtime hours x 1.5)]
= $10 hourly rate
This employee would be paid $10 per hour for the first 40 hours and $15 per hour ($10 x 1.5) for each hour of overtime. Remember, whatever hourly rate you decide to pay reclassified employees, it must meet or exceed the highest applicable minimum wage (federal, state, or local). If the result above is less than the applicable minimum, you would need to raise the rate of pay to meet the requirement.
Click here for more information on these options, or use our calculator to help you estimate the costs of each of these options for your business.