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New overtime rules arrive; compliance date set

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in Centerpiece,Human Resources,Overtime Labor Laws

The Department of Labor's long-awaited update to the Fair Labor Standards Act's overtime rules has effectively doubled the salary threshold at which most salaried workers are exempt from being paid overtime, raising it from $23,660 to $47,476 per year. The new rules become effective December 1, giving employers a six-month breather as they prepare to overhaul their policies.

The salary threshold—lower than the $50,440 proposal originally released by the White House—will automatically update every three years based on wage growth, so as to keep current with inflation rates. It will be tied to the lowest-wage region of the country.

When calculating income, employers will be permitted to factor in nondiscretionary bonuses, incentive payments and commissions, which can satisfy up to 10 percent of the new standard salary level.

Not changed in the DOL's rules revision: the duties test that determines exemption from overtime pay for executive, administrative, learned professional, computer and outside sales employees.  

Under the new rules, millions more workers are expected to be made eligible for time-and-a-half pay when they work more than 40 hours per week. The changes are expected to have a particular effect on retail and restaurant workers who tend to perform both managerial and hands-on duties, and who were often previously considered exempt from extra pay.

What employers must do now

  • Review current salaries for all your exempt employees.
  • Determine which employee salaries you can raise to retain exempt status and which you can’t based on your company’s labor budget.
  • 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.
  • Decide whether you will lower the hourly rate when you convert from exempt to hourly status so that total earnings remain the same.
  • Don’t forget to consider morale if you plan to slash that hourly rate.

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