The FLSA requires covered employers to pay “non-exempt” employees at least the minimum wage for each hour worked as well as overtime pay for all hours worked in excess of 40 in a workweek.
If your exempt employees earn less than the new salary requirement, they will no longer meet exemption criteria and must be classified as non-exempt and paid overtime whenever they work more than 40 hours in a workweek. An employee who meets all applicable exemption criteria, including the new minimum salary requirement, salary-basis test, and applicable duties test, may continue to be classified as exempt.
While most employees are “non-exempt,” the FLSA provides for exemptions from its minimum wage and overtime requirements for certain administrative, professional, executive, outside sales, and computer professional employees. These employees are known as “exempt” employees. To be considered “exempt,” employees must generally satisfy the following three test.
Salary Level Test — Employees must earn at least $913 a week ($47,476 for a full-year worker).
Salary Basis Test — Employees must earn a salary, that is, a guaranteed minimum amount of money that will be paid in any week that the person performs “any” work, regardless of the quality or quantity.
Duties Test — Employees must perform certain job duties. This is where most mistakes are made. Just because a person’s job title includes the word “administrator” or “manager” doesn’t mean he or she performs the job tasks required for exempt status.
There are four types of duties: executive, administrative, professional, and creative professional.
Executives must:
- Primarily perform management duties.
- Regularly supervise at least two full-time equivalent employees (not volunteers).
- Have authority or significant influence in hiring, firing, discipline, and promotion decisions affecting employees.
Administrators must:
- Primarily perform office or non-manual work related to the ministry’s management or business operations. Examples: business administrators, daycare directors, school principals.
- Use “discretion and independent judgment” in making decisions regarding significant matters. (Most support staff and clerical workers don’t meet this standard.)
Professionals must:
- Do work requiring advanced knowledge in a field of science or learning, such as theology, teaching, accounting, or law. Examples: clergy, teachers.
Creative Professionals must:
- Do work involving invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. Examples: musicians, worship ministers, writers, graphic artists.
The Ministerial Exception
In addition to the white-collar exemption, the courts have created a “ministerial exception” that exempts “clergy” from federal wage and hour laws.
Clergy Financial Resources’ National Tax Office serves as a resource for clients to help analyze complex clergy tax, church payroll & HR issues . Our professionals are committed to helping clients stay informed about tax news, developments and trends through various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
For more information or if you need additional assistance, please use the contact information below.
Clergy Financial Resources
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