On May 18, 2016 the Department of Labor released the final overtime rule that will take effect on December 1, 2016. These changes will affect all employees currently classified as exempt. Employees classified as exempt must pass the salary and duties test.
What has changed?
- The current salary level for exempt employees is $23,660 annually ($455 per week). The new rule has more than doubled the salary threshold and raises the exempt employee salary to $47,476. Any employee making less than $47,476 annual ($913 per week) will be reclassified as nonexempt and begin earning overtime as of December 1, 2016.
- Up to 10% of minimum salary may be paid through nondiscretionary bonuses, incentive pay, or commissions. These must be paid at least quarterly.
- The salary level will increase every three years. The increases will be based on the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage census region. The next increase will happen on January 1, 2020.
What hasn’t changed?
- No changes have been made to the duties test that employees must pass in order to be classified as exempt.
What do you need to do before December 1, 2016?
- Review the salary level for all employees currently classified as exempt. If the current salary is below the new threshold you need do to one of the following:
- Raise salaries to maintain exemption;
- Pay current salaries with overtime after 40 hours;
- Reorganize workloads to lower hours for employees to keep hours below 40 per week.
The Department of Labor website – https://www.dol.gov/whd/overtime/final2016/ – contains a lot of information regarding new rule and compliance.
Please contact our office with any questions regarding the new overtime rule or if you would like help analyzing exempt employee wages.