A Few Things to Keep In Mind About Overtime…

On December 1, 2016 the rules regarding the overtime regulations for white collar workers are going to take effect. Overtime pay will remain one and a half times the regular rate of pay after 40 hours of work in a work week, but the rules surrounding overtime, and those who qualify for overtime, will see some changes.

All hourly employees will still qualify for overtime pay, but the rules for salaried workers are going to change, however the test that determines which salaried employees qualify for overtime is being raised for the first time since 2004. The salary threshold will rise from $455 per week, or $23,660 for a full-year worker to $913 per week, or $47,476 for a full-year worker. This amount has been calculated based on national census data. Rather than having to issue new rules every few decades, as in the past, the new rules have also included a recalculation of the threshold every three years starting in 2020.

The exemptions for managers and administrators will not change.  Administrators and managers whose wage is above the salary threshold still will not qualify for overtime. The current overtime laws have long courted controversy because of this exemption. Many employees accused their employers of giving them fake job titles to ensure they did not have to pay them overtime, but the new salary threshold will hopefully offer protection to anyone who may be overlooked in the current system. There will still be a number of professions who are exempt from these overtime laws including teachers, doctors and highly compensated employees or HCE’s according to federal regulations.

The overtime laws were put in place to ensure workers were not forced into long hours without proper compensation. Employees who needed employers to work more hours were forced to hire more employees and those who only occasionally needed overtime work could simply choose to pay workers the occasional higher wage. The drastic changes to the salary threshold could play out in several ways as some employers are threatening to reduce salaried workers to hourly or lowering starting salaries, but the changes are intended to give more workers either more reasonable hours or better compensation.

Small businesses have the most freedom of choice in this situation because, depending on your business and your employees, you can decide on a smaller scale how to make these changes work for your business.  However, you do need to keep them in mind. Failure to comply with federal overtime law can lead to serious ramifications and lawsuits. You can read more at the Department of labor website here. If you have any questions, you should consult your business’s financial advisers and your business attorney.

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