Last updated on May 19th, 2016 at 11:21 am
The Department of Labor’s new overtime ruling officially will be issued today, May 18. However, many of the pertinent facts were leaked yesterday, according to Chris Cooley, co-founder of MyHRConcierge, who provided this information to The Shelby Report.
The final ruling will:
• Increase the overtime exemption from $23,660 to $47,476. The exemption level is slightly lower than the proposed $50,440 level.
• The exemption will be updated automatically every three years. This is a departure from the proposed rule that called for annual updates for the exemption level.
• The new overtime rule will go into effect on Dec. 1, 2016—a much later effective date than the initial proposal that had the rule going into effect with 60 days of the issuance of the rule.
According to the Obama Administration, the new rule is expected to extend overtime protections to 4.2 million more Americans who are not currently eligible for overtime. It is also anticipated to boost wages for worker by $12 billion over the next 10 years.
So what should I do now?
This ruling will have a significant impact for many employers. It is very important that employers don’t wait until Dec. 1 to begin addressing the effects of the ruling. Some of these steps should include:
• Determine the financial impact of the ruling by determining the number of employees that fall between the previous threshold of $23,660 and the new threshold of $47,476 and the overtime they currently work. Part of this financial impact calculation should be comparing the cost of pay increases over the threshold versus paying employees overtime.
• Determine if currently exempt employees that will become non-exempt will remain salaried or will they be changed to hourly employees. If they become hourly, determine how you will calculate their new hourly rate. Will the overtime they will now receive be factored in determining their hourly rate?
Review operational needs to determine how to best reduce the overtime hours of those that will be changed to non-exempt under the new ruling.
• Develop a plan on how to communicate the changes to your employees. There will undoubtedly be changes that will hurt employee morale, such as changing an employee from salaried status to hourly status. Therefore, it will be very important to have a plan in place on how to communicate any changes in the best manner possible.
Now that the final ruling has been issued, it is important to be proactive and begin the process as soon as possible to mitigate the financial risk of the new ruling, Cooley says.
One important item that was revealed in the final ruling related to how bonuses will be addressed with the threshold. For the first time, employers will be able to count non-discretionary , incentive pay or commissions toward as much as 10% of the salary threshold as long as they are paid quarterly. This is a significant change from the prior ruling.