The Department of Labor updated overtime regulations in the Fair Labor Standards Act (FLSA) this year. These regulations change the overtime eligibility threshold for workers paid over $47,476 annually and expands overtime protection to over 4 million workers. These new regulations take effect December 1, 2016.
What Are the New Regulations on Overtime?
The Department of Labor, at President Obama's direction, updated the rules for workers eligible to receive overtime. Over the last two years, the Department of Labor issued several working documents, issuing "The Final Rule" on May 2016. Over 4 millon workers are affected by the new 2016 FLSA requirements and overtime regulations.[1] * Key Provisions of the Final Rule [2]*
The Final Rule updates salary and compensation levels needed for executive, administrative, and professional (EAP) workers to be exempt from minimum wage and overtime pay protections.
In Summary, the Final Rule:
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Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South, which is $913 per week or $47,476 annually for a full-year worker (an increase from $455/week to $913/week);
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Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004; and
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Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
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Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level. The Final Rule makes no changes to the duties tests."
It is important to note that job title alone does not confer exempt status; both an employee's specific job duties AND salary must meet the Department of Labor's standards to be exempt from overtime pay. [3]What Does the FLSA Final Rule Mean for My Company?
It may mean you may need to start tracking hours for exempt salaried employees who are at or below the $47,476 threshold. Non-discretionary bonuses may now be included in the calculation of pay. Some of the biggest verticals affected are higher education, non-profits, and government.
To reduce the impact of the new overtime regulations, consider empowering your managers to proactively manage and plan for overtime occurrences by giving them transparency to worked hours, earnings, overtime and job description information for those they manage. Assist them to develop accurate schedules that meet projected resource needs and predict when overtime will be required. Kronos Workforce Central can provide better information to you and your managers to better plan resource and scheduling needs.
How can we help you create a strategy to ensure compliance with the new FLSA Final Rule?
[1] https://www.whitehouse.gov/sites/whitehouse.gov/files/documents/OT_state_by_state_fact_sheet_final_rule_v3b.pdf
[2] https://www.dol.gov/whd/overtime/final2016/overtime-factsheet.htm
[3] https://www.dol.gov/whd/overtime/nprm2015/faq.htm
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