The U.S. Department of Labor (DOL) released regulations on May 18, 2016 that will expand overtime pay to an estimated 4.2 million workers.
Key Points to the New Rules:
- The new rules increase the salary threshold at which administrative and professional workers are exempt from overtime pay from $23,660 to $47,476. Those that earn above the old requirement, but below the new requirement will now be entitled to time-and-a-half wages for each hour they work beyond 40 hours per week.
- The new rules take effect on December 1, 2016.
- The salary level will be adjusted every three years to account for wage inflation.
- Blue-collar hourly workers are already entitled to overtime pay regardless of their earnings level. This does not change.
- Employers can include non-discretionary bonuses and commissions to comprise up to 10% of the salary level.
How Employers Should Respond:
- Review your current employee classifications to determine if the new rules will change who is exempt and non-exempt.
- Analyze whether raising a certain employee’s salary to meet the exemption requirement would be more economical than paying overtime.
- Consider if it is more economical to hire new employees to eliminate the need for employees to work overtime.
- Determine if it is just better to keep salaries the same and pay the overtime. This will be beneficial if overtime is limited and/or pay is at the low end of the range.
