The higher education landscape is constantly transforming. Learn more about recently passed and pending legislation, including how proposed changes to the Fair Labor Standards Act salary thresholds for exempt employees could significantly impact payroll processes.
Fair Labor Standards Act
The Obama administration proposed a new salary threshold to the Fair Labor Standards Act (FLSA). Employers must either raise the salary threshold for exempt employees from $23,660 to $50,440, or pay them overtime for hours worked over the standard forty hours. Colleges and universities are facing the possibility of a massive payroll disturbance with this change. Apparently, the Department of Labor (DOL) is expected to notify institutions that it has 60 days to comply with the change in salary/paid overtime.
As a result of this proposal, institutions could do a number of things to comply, including raising the salaries of lower-paid employees to get over the new threshold, requiring that lower-paid employees work no more than forty hours per week, or spending millions more on overtime pay.
There are several major areas of concern for employers regarding these proposed changes, including the depth and breadth of the impact, a rise in the salary level, and a reduction of workplace flexibility, to name a few. The DOL is estimating that more than 11 million employees will be affected. Currently, to be exempt, employees must make more than $455 per week or $23,660 annually plus have duties that comply with the FLSA exempt responsibilities. The proposed rule sets the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers. If the proposal is adopted, the 2016 level is projected to be $970 per week or $50,440 annually. Changes will require employers to reclassify a significant number of employees from exempt to non-exempt status, requiring tracking their hours worked, which results in the loss of workplace flexibility.
There is no date set when these changes will take effect; however, adoption is likely sometime in 2016.
Pell Grants Outlined in President’s State of the Union Address
On January 12, 2016, President Obama gave his last State of the Union Address. During the address, he asked that significant investments be made to make college more affordable through the federal Pell Grant program. Two new Pell Grant proposals will help students accelerate progress toward their degrees by attending school year-round and will encourage students to take more credits per term, increasing their likelihood of on-time completion. In fiscal year 2017, these changes would mean an additional $2 billion in Pell Grants for students working toward their degrees.
- Pell for Accelerated Completion – This proposal would allow full-time students the opportunity to earn additional Pell Grant funds in a single academic year, enabling them to finish faster by taking additional courses. Many full-time students exhaust their annual Pell eligibility after just two semesters. This proposal will provide nearly 700,000 students with an additional $1,915 (average).
- On-Track Pell Bonus – The On-Track Pell Bonus creates an incentive for students to stay on track or accelerate their progress toward a degree through an increase in the maximum Pell Grant award of $300 for students who take 15 credits per semester in an academic year. The bonus would encourage students to take the credits needed to finish an associate degree in two years (60 credits) or a bachelor's degree in four years (120 credits).
Additional key administration proposals supporting college access and success include America’s College Promise, which will assist millions of students to earn the first half of a bachelor’s degree (at a high-quality community college) and the skills required for success in the workplace at no cost; the College Opportunity and Graduation Bonus program, which will provide funds to high-performing colleges that enroll and graduate low- and moderate-income students; and the American Technical Training Fund, which will provide competitive grants to support the development, operation, and expansion of innovative job training programs in fields of high demand.