A new overtime rule takes effect on
December 1, 2016, and the Department of Labor estimates that over 4 million
workers will become entitled to overtime in the first year of the change. If
your employees are included in that number, now is the time to begin preparing.
Here's what you need to know.
The
background. The Fair Labor
Standards Act mandates the federal minimum hourly wage and
time-and-one-half pay for hours worked beyond 40 in a week. The Act exempts certain "white
collar" workers and "highly compensated employees" from both the
minimum hourly wage and the time-and-one-half rules. These workers are
collectively classified based on duties and level of earnings. Though job
titles do not determine status, typically, executive, administrative,
professional, outside sales, or computer workers fit into the white collar
category. Highly compensated employees are subject to a more relaxed duties
test and a standard annual salary amount.
What's
changing. The new rule doubles the annual salary level for the
white collar exemption from $23,660 to $47,476, or $913 per week. For highly
compensated employees, the total annual compensation level required to claim
the exemption rises from $100,000 to $134,004. These salary levels will
increase every three years, beginning on January 1, 2020.
How
to prepare. Some of your employees may move from exempt to
non-exempt status. The only way to be sure is to begin tracking hours and
documenting job duties. Once you have determined how the new rule will affect
your payroll, you'll have choices to make, including requiring authorization
for any overtime, increasing salaries, hiring additional workers, re-assigning
duties, and restricting after-hours work-related activities. You may need to
update your payroll software as well as your employee handbook and educate your
staff about the new requirements.
Contact us if you have questions.
We'll be happy to work with your compliance team to assess the impact of the
new overtime rule.
