New Overtime Rules: Planning Tips for Employers

By now you have probably heard about the U.S. Department of Labor’s final ruling on thresholds for over overtime pay requirements. The new rules are effective January 1, 2020, and will make 1.3 million American workers newly eligible for overtime pay.

Now is the time to take a deep dive into your employees’ salary levels and job responsibilities in order to prepare for possible changes to your payroll budget in 2020.

DOL Overtime Rules – What are the Changes?

• Raises the standard salary level from the current $455 per week (~$23,660 annually) to $684 per week(~$35,568 annually);
• Raises the total annual compensation requirement for highly compensated employees from the currently enforced level of $100,000 per year to $107,432 per year;
• Allows employers to use non-discretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices; and
• Revises the special salary levels for workers in U.S. territories and the motion picture industry.

Tips for Employers

• Employers should take time to review their exempt employees’ current salaries and evaluate their 2020 pay structure. A thorough evaluation will aid in identifying changes that may need to be made in payroll budget, position and classification structure, and reclassifying positions.
• If changes in classification need to be made, employers should consult Human Resource professionals and Legal counsel to confirm compliance with the new rules.
• It is also important for employers to review their employees’ job responsibilities in order to correct errors and confirm compliance with FLSA’s executive, administrative, and professional exemption criteria.

Employers should gain a thorough understanding of the changes and consult with HR advisors to address questions or compliance concerns before the new rules take effect. The Department of Labor provides a variety of resources for employers on the new ruling and other labor compliance topics. Learn more on their website.

Sources

• Labor Law, Richmond Times-Dispatch
• U.S. Department of Labor