Ready For the New Overtime Rules? The new Fair Labor Standards Act overtime rules will have an impact on employers nationwide. Because of the federal rule changes, 4.2 million workers will become eligible for overtime pay, according to Department of Labor estimates.
The requirements take effect December 1st. To help you get your payroll in order by that deadline, here's a high-level look at the key changes and the steps you need to take.
Federal rules require employers to pay most employees at least the minimum wage, plus at least time-and-a-half for anything over 40 hours a week (states may have other rules). There are exemptions to this overtime requirement for certain white-collar employees. The new overtime rules increase the minimum salary a white-collar employee must make to be exempt―the first update to this salary threshold since 2004. Under the new rules:
The changes mean that exempt white-collar employees who make more than the current salary threshold (standard or highly compensated), but less than the new threshold, will be reclassified as non-exempt and be eligible for overtime pay. Employers will either have to pay them overtime when they work over 40 hours a week, or raise their salaries above the relevant new threshold to keep them exempt.
You also need to consider any state overtime rules, because they may be different. In California, for example, the salary threshold for standard exempt status is set at twice the state minimum wage, times 40 hours. That currently works out to $800/week ($41,600 annually), which is below the new federal threshold, but it will rise with the state's scheduled minimum wage increases. In 2019 California's minimum wage will hit $12/hour, making the state salary threshold $960/week ($49,920 annually), which will be higher than the federal threshold. California rules also do not allow employers to use bonuses, incentive payments and commissions for up to 10% of the salary amount.
These are just some of the differences. To learn more about your state regulations, talk to your attorney or HR professional.
If you don't have a compliance plan, it's time to get started. Here's how.
To learn more about how Armanino can support your compliance efforts with cost-benefit analysis and payroll management services, contact the Outsourced Finance and Accounting team.