Overtime pay gets an update

After months of anticipation, the DOL has finally made a formal announcement about the new overtime salary threshold: $47,476. Not a nice round number like the proposed $54,440, but still divisible by two and still more than double its predecessor of $23,660.

The new regulation also states an increase will occur every three years to match (and stick with me on this lengthy- technical sentence) the 40th percentile income of the country’s lowest-income region (currently the Southeast).  The last increase was in 2004, and the increase prior to that was before Millennials were even a generation.

With this added to the new rule, a dramatic increase in salaries can be avoided in the future – thus preventing scrambling and panicking by employers to comply.

It’s estimated 4.2 million workers will need to be reclassified as non-exempt by the December 1st  deadline. Below are some suggestions on how your company can prepare:

  1. Identify which salary employees fall under the $47,476 threshold.
  2. Start tracking hours for salaried employees.
    • There are computer and phone applications (which can also relay the location for employees on the road) to help track remote and non-remote employee hours.
    • These applications make it easy for both you and your employees to track hours, submit timesheets, and audit logs.
  3. Run numbers and possible scenarios.
    • Should you raise the salary for employees to meet the new threshold, or would it be better to keep them at their current salary and earn overtime?
    • Is it better to move them to hourly pay based on your hour tracking?
  4. Re-examine job descriptions and tasks.
    • Are your current employees correctly identified?
    • Are they working more often in tasks that do not qualify them as exempt?
    • Here is a brief excerpt from the FLSA website describing executive job duties. Click here for more details about exemption rules: The Job duties are exempt executive job duties if the employee
      1. regularly supervises two or more other employees, and also
      2. has management as the primary duty of the positions, and also
      3. has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments
  5. Consider the impact changes will make.
    • What will keep you in compliance but also have the least negative impact on your company budget and employee morale?
  6. Develop a plan of execution for changes in policies, training, and job titles.
  7. Keep up communication with your employees on these changes.
    • Take this as an opportunity to discuss wage and hour concerns that may have already been an issue for some employees.
  8. Seek legal advice and help.
    • This a federal change, but every state and county has their own regulations. Make sure you are in compliance with all the regulations to avoid any fines.

Even though this is a dramatic increase, at least we finally have an official number and can begin to properly prepare.