The Department of Labor’s new salary level of $47,476 for white collar employees exempt from the overtime provisions of the Fair Labor Standards Act takes effect December 1. While the new rules more than double the current minimum salary required for the exemption, under Section 541.602(a)(3), DOL will allow employers to use certain incentive pay to satisfy up to 10 percent ($4747.60) of the required salary.

In order to qualify toward the minimum salary, the bonuses, incentives and commission pay must be non-discretionary, meaning that it must be based on a plan or policy with established payments for achievement of certain business goals. The incentives must be paid no less frequently than every quarter year. If by the last pay period of the quarter, the employee’s weekly salary plus incentive pay does not reach 13 times the minimum weekly payment ($913), the employer may make one final payment to reach the required level, no later than the next pay period following the end of the quarter. This payment would only count toward the minimum for the prior quarter, and not the quarter in which it was paid.

This rule may mitigate the otherwise large salary increase required in many situations to meet the new minimum exemption level.