Change to Overtime Rules

Beginning December 1, 2016 there is a change in how overtime is paid to “white collar” workers. While this does not apply to anyone who is eligible for overtime now, including hourly workers, this does apply to workers who have not had a chance for overtime in the past. So let’s look at the changes and how they make effect your business.

  1. White-collared workers who earn at least $913 per week ($47,476 annually) will be disqualified from overtime pay, which is time-and-a-half on excess of a 40-hour work week.
  2. Nondiscretionary bonuses can satisfy up to 10% of this new salary requirement as long as they are paid at least quarterly.
  3. Highly compensated employees mu be paid at least $134,004 annually to be disqualified from overtime pay.
  4. Automatic updated to these salary levels will be updated every three years beginning on January 1, 2020.

So what does this all mean. This means that some companies are scrambling to figure out how to comply with the new rules. Many of them have not budgeted for this significant payroll increase and cannot afford the increase. This is much like cost-of-living increases and will be adjusted over time impacting employees’ salaries and companies’ budgets.

What is the plan to combat this change, and how are companies dealing with the increases? The following are some immediate steps companies can take to prepare for the change:

  1. Assess job description. Identify which exempt position are close to the new salary level and which position should be reclassified as non-exempt. Move people as needed.
  2. Assess and Choose. There are several options for employers to fix the situation: 1) raise exempt employees to the new levels to pay no overtime. 2) Leave exempt employees’ salaries below the new levels and pay time-an-a-half for overtime worked. 3) Limit workers’ hours to 40 per week by reorganizing, adjusting schedules, and hiring more people. 4) Use a combination from the suggestions that work for you and your company.
  3. Introduce Time-Keeping. For employees not use to keeping time while they are on the job, you will have to develop, implement, and train them on keeping track of their time. There will be a learning curve, so ensure you give yourself enough time for the adoption.
  4. You need to keep your employees up to date with all the changes. Keeping them in the loop will ensure an easy transition.
  5. Get help. Many of the rules that are changing are also complicated. It is best to seek professional advice to help keep the cost down and make sure you don’t make a costly mistake.

This transition will take time and it is important to get it right. Mistakes can be costly and your business cannot afford to take penalties if something goes wrong. Stat now, start slow and create a plan to ensure the transition is smooth and easy.