Overtime Rules: Are You Ready?

Reminder: The Department of Labor’s final rules regarding the overtime exemption requirements go into effect December 1, 2016. So in the next month, you must get in compliance with these rules:

  • Salary increase for certain exemptions. The minimum salary requirement for administrative, professional, and executive exemptions dramatically increases from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). If you aren’t paying salaried employees $47,476 per year by December 1, 2016, you will be exposing your business to risky Department of Labor investigations and employee lawsuits.
  • Increase for highly compensated employees. The minimum total compensation required for the highly compensated employee exemption increases from $100,000 per year to $134,004 per year, which must include at least $913 paid on a weekly salary basis.
  • A portion of certain bonuses count. Employers may use nondiscretionary bonuses (generally those announced or promised in advance), incentive payments, and commissions, to satisfy up to 10 percent of the minimum salary requirement for the administrative, professional, and executive exemptions, as long as these forms of compensation are paid at least quarterly.
  • Automatic updates. Every three years, the DOL will adjust the minimum salary requirement, meaning you will need to review and adjust (if necessary) exempt employees’ salaries every three years as well.

 

Don’t wait until December; take steps NOW to prepare for the rule changes:

  • Ensure that your “exempt” employees are actually exempt. It takes more than the proper salary for an employee to be exempt. Call me for help with reviewing the primary duties your exempt employees actually perform to ensure they meet the DOL’s criteria for administrative, professional, and executive exemptions.
  • Compare the costs. If your exempt employees’ salaries fall below the new minimum, you will generally have to either: 1) raise their salaries to the new requirement; or 2) reclassify the affected employees as non-exempt and start following the overtime rules whenever they work more than 40 hours in a workweek. Review exempt employees’ salaries and their typical number of hours worked to determine which option is more cost-effective for your business.
  • Review your timekeeping policies. Get from me written policies and procedures for your business to ensure all non-exempt employees are accurately recording all time worked. I can provide training for employees on proper timekeeping practices and otherwise complying the compensation laws.

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