HR Management & Compliance

Bonuses and the New FLSA Overtime Regulations

By Susan Prince, JD, M.S.L., Legal Editor

The federal Department of Labor (DOL) has released final changes to the overtime regulations. These changes are effective December 1, 2016. The most prominent change is the increase in the salary level required for exemp­tion from overtime to an annual salary of $47,476. This translates to a weekly salary of $913.

This means that your employees who currently earn more than $455 per week ($23,660 annually), but less than $913 per week, need to be reclas­sified as nonexempt by December 1, 2016, and will then be entitled to overtime for any hours worked over 40 in a week.

Under the final regulations, employers will now be able to count nondiscretionary bonuses, incentive payments, and commissions toward as much as 10% of the salary to determine whether they have reached the salary threshold for exemption from overtime. In order to count, these payments must be paid on a quarterly or more frequent basis. The new rules also permit the employer to make a catch-up payment.

A highly compensated employee’s (HCE) annual compensation may continue to include commissions, nondiscretionary bonuses, and other nondiscretionary compensation earned, as it has in the past. The DOL set the total annual compensation level for HCEs at $134,004 per year, up a threshold of $100,000. An HCE must receive at least the new standard salary amount of $913 per week on a salary or fee basis.

In addition, an HCE must customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee and have the primary duty of performing office or nonmanual work.

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