After several years of attempting to get proposed overtime changes off the ground, the U.S. Department of Labor announced on September 24, 2019 a final rule to make 1.3 million additional American workers eligible for overtime pay.
The new provisions update the Fair Labor Standards Act’s (FLSA) regulations and minimum salary thresholds in which executive, administrative, and professional employees can be exempt from overtime.
These final rules will go into effect as of January 1, 2020.
New Update to Salary Thresholds
Following are the provisions of the new rules:
- The standard salary threshold for classifying an employee as exempt from overtime increases to $684 per week ($35,568 annually), up from $455 per week ($23,660 annually).
- The minimum salary threshold for Highly Compensated Employee (HCE) exemption increases to $107,432 annually, up from $100,000.
- Nondiscretionary bonuses, incentive pay, and commissions, may make up to 10 percent of this standard income threshold, as long as they are paid at least annually.
- Special salary levels for workers in U.S. territories and the motion picture industry will be revised.
Keep in mind that these updates are at the federal level. Should your state law’s minimum salary be more beneficial to the employee, the federal law would not affect employers in that state.
Since the thresholds were last updated in 2004, these updated thresholds account for growth in employee earnings over the past 15 years. Within the final rule, the DOL reaffirms its intent to update the earnings thresholds more regularly in the future.
Business owners and employers should evaluate any employee that they currently classify as exempt from overtime. If he or she is paid less than $684 per week ($35,568 annually), employers will need to choose between raising pay to meet the minimum and maintain exemption, or to reclassify the employee as non-exempt and begin paying overtime.
Partner with a Trusted Payroll Professional
Federal updates such as this can be seamless when you partner with Abacus Payroll. First, consider implementing an electronic timekeeping system, such as Swipeclock, which can automatically track and calculate overtime for your employees. Second, Abacus Payroll’s HR Help Center has specific overtime and FLSA resources to help with this change, a labor law library, and as-needed email alerts to keep you informed when law updates occur at both the federal and state level.
It’s challenging enough to keep up with running your business. Have one less headache by outsourcing your payroll, HR, and workforce management responsibilities in order to keep your business compliant with ever-changing tax and labor laws. Fill out our form for a quote or give us a call at 856.667.6225.