On May 18, 2016, the U.S. Department of Labor (DOL) released a new rule that will overhaul overtime wage payment. The new rule doubles the salary threshold that employees must meet to qualify for the overtime wage payment exemption—a change that could affect more than 4 million workers across the United States.
What is changing?
Federal law requires that eligible employees be paid time and a half for all hours worked over 40 in a workweek. Not all employees, though, are currently eligible for overtime pay. For instance, certain jobs like executive, administrative, professional, outside sales, computer employees and some highly compensated individuals are not eligible for overtime pay.
Currently, the salary threshold established by the government for overtime pay is $23,660 a year or $455 per week. The new rule doubles the salary threshold to $47,476 per year or $913 per week.
The new rule also increases the $100,000 salary threshold for highly compensated individuals to $134,004 per year—the 90th percentile of wages earned by full-time salaried workers nationally.
Why was the new rule introduced?
The DOL changed overtime regulations due to concerns that the regulations were outdated. The salary thresholds have only changed twice in the past 40 years.
How could this change affect me?
The new overtime regulations may impact whether you’re eligible for overtime pay. This determination will be based on a variety of factors, including your annual salary and the type of work you perform. Overtime regulations are complex, so there are many caveats to whether you are considered eligible.
In addition, the new rule will force employers to re-evaluate their overtime pay policies, assess employees’ salaries, review employees’ exempt status, adjust payroll systems and analyze workflows—all of which may affect your ability to earn overtime pay.
When is the rule effective?
Employers must comply with the new rule by Dec. 1, 2016.
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