As you may have heard by now, the Department of Labor (DoL) recently revised its overtime regulations in a move that will impact 4.2 million American workers[1] and countless employers.
As of December 1, 2016, more workers will qualify for overtime pay. While the new rule stretches over 160 pages, as a business owner it’s critical to understand if and how your business is affected so you can adapt with ample time.
4 Things You Need to Know About the New Overtime Regulations
1.Drastically more employees will be eligible for overtime
As of Dec. 1, the salary threshold for employees who are potentially eligible for overtime pay increases to $913 per week from $455 per week ($47,476 per year and $23,660 per year respectively.) As a result, many more workers will qualify for overtime.
2. You add other types of compensation towards the salary threshold
Employers may factor in certain forms of compensation other than salary, such as discretionary bonuses and commissions, towards up to 10% of the salary threshold. These payments must be paid on a quarterly or more frequent basis to count towards the threshold.
3. There’s an change for HEC employees too
The minimum salary level to be classified as a Highly Compensated Employee (HEC) will increase from $100,000 to $134,004. A HEC is held to different IRA limits and thresholds than other employees.
4. The new overtime threshold will update more regularly
Going forward, the DoL will automatically update the minimum salary level every 3 years. The minimum salary level is set according to the 40th percentile of full-time salaried workers in the lowest income area in the States. The next increase will happen January 1, 2020 and is predicted to be $51,000.[2]
What won’t change with the new regulations
Plus, a quick review on regulations that won’t change: overtime is paid by the hour as at least time-and-a-half of the employee’s regular pay, and kicks in when the employee works more than 40 hours in a given week. Overtime is not required for employees working weekends or holidays unless that time is in excess of the 40-hour week.
So, what should your next steps be? First, determine whether the exempt status of any of your employees will change come December, and update accordingly.
Then if you have any questions about how your financials should change, get in touch – we would love to help!
[1] Source: http://www.law360.com/articles/800243/what-to-know-about-the-dol-s-new-overtime-regulations
[2] Source: http://compensation.blr.com/Compensation-news/Compliance/Employee-Overtime/Snapshot5-key-points-on-the-DOLs-new-overtime-regu/