You have made it halfway through 2024, congrats!
Now is a good time to consider payroll changes that could impact on your church come the start of Quarter three. There are changes going into effect on both federal and state levels that may effect you!
Fair Labor Standards Act
Many are aware of the Fair Labor Standards Act (FLSA) but are not aware of how it started. In 1938 the FLSA was passed to safeguard traveling salespeople. The effort was to ensure that those who were traveling across state lines for commerce were not underpaid. Any individual who was engaged in commerce (or in the production of goods for commerce), who was crossing state lines for engaged work and who did not fall under either the White-Collar Exemption or the Highly Compensated Employee exemption was expected to be paid time and a half for any hours over 40 they worked.
The FLSA has continued throughout the years with increases to the minimum salary basis for the two exemptions listed above. Now it is no different with an increase to the minimum salary threshold going into effect for July 1, 2024, again on January 1, 2025, and then every 3 years after (July 1, 2027). These minimum salary threshold limits are adjusting as follows:
White-Collar Exemption
1. July 1, 2024 - $844 per week ($43,888 annually)
2. January 1st, 2025 - $1,128 per week ($58,656 annually)
3. Auto update each 3 years, (July 1, 2027, to be published 150 days (about 5 months) prior)
Highly Compensated Individual Exemption
1. July 1, 2024 - $132,964 per year annual compensation ($844 per week minimum)
2. January 1, 2025 - $151,164 per year annual compensation ($1,128 per week minimum)
3. Auto update each 3 years, (July 1, 2027, to be published 150 days (about 5 months) prior)
So how does this all apply to churches?
Clergy (licensed, commissioned, or ordained) in the service of a church are not subject to FLSA, so the above changes do not impact their compensation. However, the changes do apply to church employees. Although there is much debate on if the work of church employees should be considered “engaged in commerce or in the production of goods for commerce” there have been many cases where individual employees employed by churches have been deemed as eligible under FLSA.
It would benefit every church to explore if their non-clergy employees are engaged in commerce and should be paid overtime. Our Wisdom Payroll team is available for Wisdom advising sessions to talk you through the particulars.
For many churches that we talk to, the question of how to deal with the implications of FLSA apply. One answer is to implement a Fixed Salary for Flexible Hours (FSFH). If these individuals though are hired for set hours they can be set up with a fixed salary for those flexible hours. This allows the individuals the freedom to be paid a set amount per week while also receiving any overtime they are owed.
The process is simple. For those who are not clergy, and the church wants to pay a salary, follow these simple instructions.
1. Identify the average number of hours within a pay period that they would work.
2. Calculate their salary based on those hours and the pay rate.
3. Keep a record of their hours per pay period:
a. Verify that, for the hours worked, minimum wage laws are never violated. If the pay rate ever drops below minimum wage the employee should be paid the difference between their pay and the minimum wage pay for their hours with their pay.
b. Verify if they are owed overtime for the hours worked. If overtime is due, the employee should receive the overtime pay in their next paycheck.
Wisdom Payroll is a great way to implement a FSFH arrangement. Interested in learning more about FLSA, the July 1st updates or Wisdom Payroll? Contact us here!