Dept of Labor: Updated Overtime Rules

Posted on: November 8th, 2016

The DOL is implementing new overtime/exempt employee rules beginning December 1, 2017. The new rules strengthen overtime protections to millions of workers who will no longer rely on the application of duties test.

Key Provisions of the Final Rule:

1) The increased standard salary level is $913 per week ($47,476 annually). If a salaried employee earns below this amount, you will need to pay them overtime for time worked over 40 hours per week. The current salary level is $455 per week ($23,660 annually), set in 2004.

2) Total annual compensation requirement for highly compensated employees (HCE) increases from $100,000 to $134,004 (which must include the minimum weekly salary of $913).

3) Nondiscretionary bonuses and incentive payments (including commissions) can now count toward 10% of the new standard salary level. Payments must be made quarterly or more frequently.

4) Salary and compensation levels will automatically adjust every three years beginning 1/1/20.

Clients may prefer to change employees from salary to hourly to comply with new regulations.

Example A:
Employee has a salary of $42,000 and occasionally works overtime. To comply, their salary would need to increase to $47,476 ($5,476 increase) or they can change them to hourly of $20.20 per hour. As long as the employee works less than 180 hours of annual overtime, they will not exceed the new required salary amount.

Example B:
Employee has a salary of $42,000 and regularly works 45-50 hours per week. Based on the information above, it would be more beneficial to increase this employee’s salary to $47,476 to comply instead of changing them to hourly.
New deadlines for tax flings
Beginning with 2016 – W-2 forms are now due to the Social Security Administration by January 31, 2017!