Written by Geri Lail, CPA, Tax Partner with Thomas Judy & Tucker

The Department of Labor issued the anticipated final overtime rule on May 18th, revising the overtime exemption regulations of the Fair Labor Standards Act (FLSA).  The salary threshold for exempt status has been changed only once since the 1970’s.  The new rule increases the threshold from $23,660 to $47,476—an increase of 100%.  This change significantly increases the number of employees who will be eligible for overtime pay.  Here’s a summary of these important changes:

  • Employees who earn as much as $47,476 a year ($913 a week) will have to be paid overtime, even if they’re classified as a manager or professional.
  • The Department of Labor will increase the salary threshold every three years to keep up with inflation, with the first update on January 1, 2020.
  • Up to 10% of bonus earnings may be included in the calculation of the salary to meet the threshold, as long as the employer pays the bonus quarterly or more frequently.
  • Employers must comply with the new rule by December 1, 2016.

Prior to the December 1st deadline, employers will need to determine what this means for their business.  These are a few of the steps employers should be taking now to prepare for the implementation deadline.

  • Review your current classifications and determine which employees are affected by this change in the overtime rule.
  • Analyze the costs of paying overtime or increasing base pay.
  • Consider the impact on services performed by formerly exempt employees who must now be paid overtime.
  • Determine if any benefits will change for workers moving from exempt to non-exempt.
  • Develop a communication plan to educate employees, address potential morale issues, and ensure compliance.
  • Implement a system for tracking hours for newly eligible employees

The HR Services team at Thomas, Judy & Tucker is ready to assist you with any or all steps necessary to implement this significant regulatory change.   Contact Lorilynn Spronk, Manager – HR Services at 919-532-7965.

Read the text of the rule here:

https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-11754.pdf