New Federal OVERTIME RULES May Change Who You Pay What!
The DoL Makes Decision on Exempt Status – When Overtime Pay Is and Is Not Required!
On Tuesday, September 24, the Department of Labor released its long-awaited rulings on the salary threshold for exempt status employees – the minimum pay a salaried employee must earn in order to be classified as exempt from overtime pay requirements.
The CURRENT threshold = $455/week; $23,660 / year
The NEW threshold = $684/week; $35,568/year.
How does this CHANGE impact me?
It is estimated that close to 1.3 million workers will now be eligible for overtime pay – amounting to close to $300M dollars per year subject to the new overtime provisions if pay rates are not raised. Anyone on your team currently considered to be exempt but making less than $684/week needs to be looked at carefully. You either need to raise their pay or prepare to pay them time and half for all hours they work over 40 in any one week.
NOTE: There is no change in the duties tests for exempt workers – just the required salary levels.
The total comp requirement for highly compensated employees (also exempt from overtime pay regardless of the duties test) has been raised to $107,432 from $100,000. If you have been treating an employee as exempt even though you were paying them hourlie, or they could not pass any of the other exempt requirements, you will now need to either increase their hourly rate to arrive at earnings of $107,432/ or provide them with a salary of $684/week (plus bonuses) annually. Your other option is to pay them their hourly overtime rate which for employees falling into this category, could be substantial.
For employees paid a base pay and bonuses or commission, employers can use non-discretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10% of the required salary. For example, if you pay an employee $32,010 in base pay with an agreement to pay them the additional $3558 in annual bonus, you are complying with the law.
If you’d like to read the full text of these reg changes and see more detail, check it out here.
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