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The new overtime rules: 5 steps to take now

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in Human Resources,Overtime Labor Laws

On July 6, the U.S. Department of Labor officially unveiled the biggest overhaul of overtime law in history. Public comments on the proposal are due by Sept. 4. The final draft will be published after that and may go live as early as Jan. 1. Experts predict an effective date in spring 2016.

At the heart of the proposed overhaul is a doubling of the minimum salary level (to $50,440 per year) that employers must pay before employees can be treated as exempt from overtime if they work more than 40 hours in a workweek. What’s more, that figure will now face an annual adjustment. That’s right—not only is the minimum salary level expected to hit $970 per week when the regulations go into effect—but that salary will be adjusted upward once a year.

Changing the salary level: Exempt employees aren’t paid time-and-a-half for hours worked over 40 hours. Instead, they are paid a flat salary. They also have to meet work duty tests to fall into an exempt category such as administrative, executive or professional employee classification plus be paid strictly on a salary basis.

The current weekly salary level for most exempt categories is $455 ($23,660 per year). Employees whose salaries fall between $455 and $970 will no longer be exempt despite meeting the exempt duty and salary basis requirements.

What employers must do now

  1. Review current salaries for all exempt employees.
  2. Determine which employee salaries you can raise to retain exempt status and which you can’t based on your company’s labor budget.
  3. Analyze how many hours exempt employees now work and what it would cost if their current salary is converted to an hourly figure and they continue to work the same number of hours.
  4. Decide whether you will lower the hourly rate when you convert from exempt to hourly status so that total earnings remain the same.
  5. Don’t forget to consider morale if you plan to slash that hourly rate.

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