DOL Updates Federal Overtime Rules: Key Takeaways and HR Next Steps
Hard work apparently does pay off—as 1.3 million American workers will soon be newly eligible for overtime pay.
Earlier this month, the U.S. Department of Labor (DOL) announced it will publish a final overtime rule, which will update the earnings thresholds necessary to exempt employees from the Fair Labor Standard’s Act’s (FLSA) minimum wage and overtime pay requirements. Last updated in 2004, the new thresholds account for growth in employee earnings over the past decade and a half.
The new overtime rules will go into effect on January 1, 2020.
Here are the key takeaways from the new rule released by the DOL:
- The standard salary level will be raised from $455 to $684 per week ($35,568/year for a full-year worker)
- The total annual compensation requirement for “highly compensated employees” will be raised from $100,000 to $107,432 per year
- Non-discretionary bonuses and incentive payments (including commissions) paid at least annually can be used to satisfy up to 10% of the standard salary level
- Duties tests for executive, administrative, and professional employees will remain unchanged
Although the thresholds will not automatically update every three years to reflect marketplace changes (as proposed by the Obama administration in 2016), the DOL did commit to updating the thresholds more regularly in the future.
The Society for Human Resource Management (SHRM) recommends employers begin to immediately pull data for exempt workers earning below this new threshold and begin preparing for these changes, which go into effect in only a few months.
HR next steps recommended by SHRM:
- Review budgets across all departments and the overall company
- Weigh the pros and cons of restructuring positions, raising salaries, and/or paying more in overtime
- Flag whom you might reclassify to non-exempt or give a salary increase
- Review workers’ job duties to ensure they satisfy the applicable exemption criteria (better yet, makes this annual review to ensure continued compliance)
- Evaluate and upgrade systems for tracking time & attendance and paying bonuses
- Determine a timeline for implementing changes
- Develop a training and communication strategy company-wide for explaining and implementing these changes
By taking these steps sooner rather than later, you can go a long way toward avoiding potential issues and creating a smoother transition plan. With Netchex, Payroll and Time & Attendance are integrated with single-source technology that will make these changes easier for you and your employees to implement and track.
Netchex is the leading HCM partner helping you improve workforce management and optimizing benefits for your employees. Our powerful, yet user-friendly technology simplifies the business of HR and bring self-service features to your company to provide more independence for your team.
Talk to us to find out how to put Netchex to work for your company. Take a look at our full suite of HCM solutions that grow with your business, including payroll, compliance, HR, benefits administration, and time & attendance, backed by experts and the best technology in the industry.