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New Overtime Rules Take Effect 12/1/2016!

Crysta Poulsen, EA

June 21, 2016

The US Department of Labor (DOL) has recently changed the rules for Overtime Pay.  The changes would more than double the salary threshold for overtime eligibility to $913 per week as of December 2016.  That means employees earning a yearly salary of $47,476 or less automatically would be eligible for overtime pay.  This may not affect every business, but it will affect many.  If your employees are paid less than the new minimum but they do not work overtime, you will not be affected by the new law,  HOWEVER you will need to track their hours and pay them the required time and a half should they work overtime in the future.

Below is some information on the May 18th DOL Final Rules that has detailed information:

Regarding the Overtime Rules, there are exemptions for workers who are classified as executive, administrative or "professional" employees (EAP).  This is also known as the “white-collar exemption".  "Although the FLSA ensures minimum wage and overtime pay protections for most employees covered by the Act, some workers, including bona fide EAP employees, are exempt from those protections: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (“salary basis test”); (2) the amount of salary paid must meet a minimum specified amount (“salary level test”); and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (“duties test”)."   Below is a table that outlines these exemptions.

 

 

Basic Requirements for Claiming a

White Collar Exemption under the Standard Duties Test

EXECUTIVE

ADMINISTRATIVE

PROFESSIONAL

Salary Basis Test

• Employee must be paid on a salary basis

• Employee must be paid on a salary or fee basis

• Employee must be paid on a salary or fee basis

Standard Salary Level Test

• $913 per week

($47,476 per year for a full-year worker)

• $913 per week ($47,476 per year for a full-year worker)

• Special salary level for certain academic administrative personnel

• $913 per week ($47,476 per year for a full-year worker)

• Salary level test does not apply to doctors, lawyers, or teachers

Standard Duties Test

• The employee’s “primary duty” must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise (and managing 2 full- time employees as well).

• Additional requirements provided in 29 CFR 541 Subpart B

• The employee’s “primary duty” must include the exercise of discretion and independent judgment with respect to matters of significance.

• Additional requirements provided in 29 CFR 541 Subpart C

• The employee’s “primary duty” must be to primarily perform work that either requires advanced knowledge in a field of science or learning or that requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

• Additional requirements provided in 29 CFR 541 Subpart D

           

 

 

 

What do you need to do to comply with the new DOL regulations?

 

1.      Determine if you have salaried employees who are paid between $23,660 and $47,476 per year

         a.      If you do, you will need to track their hours worked  

         b.      If they do work overtime, you are required to pay them time and a half for those hours 

                  worked.

 

What should you do now?    

 

1.      Review current salaries, focusing on white-collar exempt employees earning between old salary threshold and new threshold.

2.      Determine which 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 amount of hours.

4.      Decide whether you will lower the hourly rate when you convert from exempt status so that the earning will remain the same.

5.      Don’t forget to consider morale – some employees may think of hourly pay as a demotion.  This requires an HR communication effort.

 

As always, if you have any questions or concerns, please feel free to contact our office.

 

All the best,

AccuPro Accounting, PLLC

 

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