Important new overtime pay rule December 1 to affect millions: Get the facts
A new overtime rule that will significantly change when you must pay overtime goes into effect on December 1 of this year. The Department of Labor (DOL) recently announced that the exempt salary threshold will increase to $47,476 a year, more than twice the current salary threshold of $23,660.
The rule will affect millions of workers across most industries. with few exceptions. Agency principals need to prepare now to be ready for how this rule will affect agency staff. In addition, agents should understand the new rule and how it will affect commercial customers. We've gathered helpful resources to assist with implementation, along with responses from the DOL to frequent questions. .
Here is the overtime final rule summary – Department of Labor: Wage and Hour Division Final Rule: Overtime
The Department of Labor outlines employer options: Plenty of Options with New Overtime Rule
Raise salary and keep the employee exempt from overtime: Employers may choose to raise the salaries of employees to at or above the salary level to maintain their exempt status, if those employees meet the duties test (that is, the duties are truly those of an executive, administrative or professional employee). This option works for employees who have salaries close to the new salary level and regularly work overtime.
Pay overtime in addition to the employee’s current salary when necessary: Employers also can continue to pay their newly overtime-eligible employees the same salary, and pay them overtime whenever they work more than 40 hours in a week. This approach works for employees who work 40 hours or fewer in a typical workweek, but have occasional spikes that require overtime for which employers can plan and budget the extra pay during those periods. Remember that there is no requirement to convert employees from salaried to hourly in order to calculate their overtime pay!
Evaluate and realign hours and staff workload: Employers can ensure that workload distribution, time and staffing levels are all managed appropriately for their white-collar workers who earn below the salary threshold. For example, employers may hire additional workers.
Tips and advice Human Resource and Employment Law experts:
Key Q&A excerpted from the DOL Questions and Answers page
What are the new salary and compensation levels under this Final Rule?
When this Final Rule takes effect on December 1, 2016, the "standard" salary level will increase to $913 per week (equivalent to $47,476 annually for a full-year worker), up from $455 per week ($23,660 annually). The total annual compensation requirement for highly compensated employees will increase to $134,004 per year, up from $100,000 per year. These levels will update automatically every three years, beginning on January 1, 2020, to maintain the earnings percentiles set in this Final Rule.
Who is covered by the FLSA? Are employees of small businesses covered?
Generally, employees of enterprises that have an annual gross volume of sales made or business done of $500,000 or more are covered by the FLSA. In addition, employees of certain entities are covered by the FLSA regardless of the amount of gross volume of sales or business done.
Who is entitled to the minimum wage and overtime pay under the FLSA?
Most employees covered by the FLSA must be paid the minimum wage (currently $7.25 per hour) and at least one and one-half times their regular rate of pay for any hours they work beyond 40 in a workweek.
Overtime and compensatory time?
The use of compensatory time ("comp time") instead of overtime pay is limited by the FLSA to a public agency that is a state, a political subdivision of a state, or an interstate governmental agency, under specific circumstances. Private employers cannot satisfy their overtime obligations by providing comp time and must pay overtime-eligible employees an overtime premium for hours over 40 in a workweek.
What are the white collar exemptions to the FLSA?
The FLSA's white collar exemptions exclude "bona fide" executive, administrative, and professional employees from federal minimum wage and overtime requirements. Certain computer professionals and outside sales employees are also included in the exemption and therefore excluded from the minimum wage and overtime requirements.