December 1st is just around the corner. Are you ready for the changes to the Department of Labor’s (DOL) overtime regulations? If you have done nothing yet, don’t worry. You still have time. And as long as you already have employees properly classified as legally exempt from overtime vs. eligible for overtime pay based on the duties they perform, the only thing you really need to focus on is wages. The DOL did not make any changes to the duties test. They just raised the minimum salary that an employee must receive to continue to be classified as exempt from overtime pay. The new rule also amended the salary basis test to now allow employers to use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.
To see if you will be in compliance, you should first run a census of your employees and see who you have coded as salaried exempt, salaried non-exempt and who is hourly. You should already be paying your salaried non-exempt and hourly employees time and a half for any hours worked over 40 hours in a 7 day period, so you can cross them off.
For the salaried exempt employees, you can cross off anyone earning a base salary of $47,476 or more. They are already compliant. Be sure to take into consideration the new provision for 10% of allowable non-discretionary bonuses and incentive payments. For the salaried exempt staff earning less than the new minimum annual salary threshold of $47,476 ($913 weekly), you could dig a little deeper and see if there is any provision that would allow you to leave them as is. For example, the DOL has an Outside Sales exemption that is not subject to the minimum salary requirements.
If you have employees who will not be in compliance with the new standard salary level, you have 3 main options in order to be ready for December 1st. You can raise their salary and keep them exempt from overtime. You can classify them as salaried non-exempt and pay them overtime whenever they work more than 40 hours in a week. Finally, you can convert the employees to an hourly rate of pay. Be sure to have any employees who no longer qualify as exempt to track their hours worked going forward.
As part of the December 1st ruling, the DOL also raised the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally. That new figure will be $134,004.
To view helpful Q&As from the DOL related to this new ruling, please visit: https://www.dol.gov/whd/overtime/final2016/webinarfaq.htm.
To see the full details on the December 1st, 2016 rule, please visit here: https://www.dol.gov/whd/overtime/final2016.