Yesterday, the U.S. Department of Labor announced the final details of its overtime rule in a fact sheet issued prior to publication in the Federal Register.
Key provisions of the final rule:
- Set the standard salary level at $913 per week or $47,476 annually;
- Set total annual compensation requirements for highly compensated employees to $134,004; and
- Establish a mechanism for automatically updating threshold levels every three years to ensure it remains relevant.
If there’s a silver lining in the final rule for employers, it’s that the effective date is set for Dec. 1, which gives businesses a little more time to comply than the original predictions of 60 to 120 days.
Employers also will be allowed to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new salary threshold.
As a result of the changes in salary level, the number of workers employers must apply the duties test to is reduced, simplifying the exemption.
Knowing the number of salaried employees making less than the new threshold, as well as the number of overtime hours they work, may help you determine the best options for mitigating the impact overtime changes could have on your business.
One option is to convert salaried workers making less than the new threshold amount to hourly. This option would require the tracking of hours worked and overtime paid, according to the Fair Labor Standards Act.
Another consideration is to raise some employees’ annual salaries above the new threshold of $913 a week ($47,476 per year) in order to preserve their exempt status. This solution might apply best to situations in which overtime hours cannot be avoided, because paying these employees time-and-a-half actually would be more expensive in the long run than simply raising their salaries above the new threshold.
Other options include shifting more work to other salaried employees or hiring additional people to offset the workload performed by previously exempt employees who now will have to be paid time-and-a-half for overtime hours.
There are many scenarios to consider and with the Dec. 1 deadline looming, it’s important for employers to not only prepare for the new overtime protections, but have a scalable plan in place to address the automatic threshold updates scheduled for every three years.
Is Your HR Tech up to the Task?
Your HR technology should play a pivotal role in managing any workforce challenge. From scheduling, time tracking and overtime reports to hiring, training and compliance, the right HR software will offer a full-service, single-database solution to handle it all.
For more information regarding the overtime rule, stay tuned to our blog. We will be updating as new changes surface. Additional resources on overtime expansion can be found at Paycom.com/overtime.