New Overtime Eligibility Rules: What You Need to Know
In an effort to increase low- and middle-income paychecks that have stagnated for years, the Obama administration earlier this year revealed a long-awaited rule that will make millions of Americans newly eligible for overtime pay, effective December 1, 2016.
The rule essentially doubles the threshold at which executive, administrative and professional employees are exempt from overtime pay to $47,476 from the current $23,660. 4.2 million additional workers are expected to be eligible to receive time-and-a-half wages for each hour they put in beyond 40 a week starting December 1, 2016.
While some businesses welcome the measure, many say it will force them to restructure salaries to avoid the regulation. Others fear it will mean demoting white-collar workers or altering workplace cultures. Here’s what you need to know:
Earning More Than $47,476 Won’t Automatically Exclude a Salaried Employee From Overtime. Highly compensated employees who pass a minimal duties test are exempt. Under the new rules, the salary minimum for highly compensated employees increased from 100,000 to $134,004.
According to the rule, having enough duties that involve independent discretion, including hiring, firing, managing and supervising can disqualify you from overtime. However current regulations aren’t clear about how much of these “executive, administrative and professional” duties somebody has to do in order to be exempt from overtime. In California those must be the majority of a person’s duties in order for the employee to be exempt from overtime pay
Bonuses. For the first time, employers will be able to use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the standard salary level of $47,476.
The Salary Thresholds Can Change. Future automatic updates to the Labor Department’s thresholds will occur every three years, beginning Jan. 1, 2020.
Many companies expect to convert salaried workers to hourly employees who will need to punch a clock and track their hours. Some will likely maintain the status of salaried employees, but will still have to monitor their hours and net the extra pay for logging more than 40. Others will either cut or lift workers’ base pay to the new threshold to avoid paying overtime.
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