In this video, BLR Legal Editor Susan Prince, JD, MSL, provides employers with what they need to know about the final overtime regulations.
Here are a few highlights from the video:
Salary Threshold for Exemption Almost Doubles
[L]et’s talk about the most important change, the salary level increase. The DOL has essentially DOUBLED the salary threshold required for exemption.
Prior to the effective date of the regulations, the salary threshold was $455 per week and $23,660 annually.
The new weekly salary threshold for exemption from overtime will be $913 per week, which is $47,476 annually, effective December 1, 2016.
Updates Every 3 Years
The DOL will automatically update the standard salary and compensation levels every 3 years going forward. This will be easier on employers than the originally proposed annual updates.
The DOL has set the salary level at the 40th percentile of full-time salaried workers in the lowest income region in the country, which is currently the South.
The DOL states that based on projections of wage growth, the threshold should rise to over $51,000 by January 1, 2020, which will be the date of the first increase.
Fee Basis Payments
How are fee basis payments affected by the new salary threshold? Administrative and professional employees may still be paid on a fee basis rather than on a salary basis.
To determine whether the fee payment meets the minimum amount of salary required for exemption, the amount paid to the employee will be tested by determining the time worked on the job and whether the fee payment is at a rate that would amount to at least the new minimum required salary per week if the employee worked 40 hours.
Steps to Comply with Final Overtime Regulations
[W]hat do you need to do now to make sure you are in compliance by December 1, 2016. Employers need to:
- Update corporate overtime policies to comply with the FLSA changes
- Establish a plan for communication between employers and employees about the benefits and additional requirements of qualifying as a newly nonexempt employee
- Determine whether your job descriptions are still accurate, reflect the jobs being performed, and reflect the skills necessary to perform the job. Review employees’ actual job duties to ensure that they still fall within the administrative, executive, professional, computer, or outside sales exemptions – and if they don’t, make the needed changes.
- Work out your plan for controlling overtime costs
- Pay overtime by December 1, 2016 to those employees who exceed the old salary threshold of $455 per week, but fall below the new threshold of $913 per week
- Will you increase the salaries of certain employee groups to raise them above the salary threshold to classify them as exempt – if you don’t want to pay them overtime?
- Will you drop the hourly rates of newly nonexempt employees, so the total cost when paying overtime will be comparable to the salary they were paid when they were exempt?
- Will you reduce fringe benefits such as health insurance contributions, 401(k) match, vacation, sick days, etc. to offset the increased overtime costs? These are all things employers should be thinking about new that the final overtime regulations have been released.