A recently issued final rule from the U.S. Department of Labor increases the salary threshold under which most salaried workers are eligible for overtime pay when they work more than 40 hours a week. The rule will take effect on December 1, 2016.
The rule essentially doubles the threshold, raising it from $23,660 annually ($455 per week) to $47,476 ($913 per week). The rule also updates the total annual compensation level above which most white-collar workers will be ineligible for overtime by raising the salary level of a highly compensated employee (HCE) to $134,004 from the current $100,000.
The White House announced that the new rule is expected to extend overtime protections to an additional 4.2 million employees and boost employee wages by $12 billion over the next 10 years.
The new rule will:
- Automatically update the salary threshold every three years, beginning January 1, 2020. Each update will raise the standard threshold to the 40th percentile of full-time salaried workers in the lowest wage Census region, estimated to be $51,168 in 2020. The HCE threshold will increase to the 90th percentile of full-time salaried workers nationally, estimated to be $147,524 in 2020.
- Allow employers to count nondiscretionary bonuses, incentive pay, or commissions toward as much as 10% of the salary threshold for non-HCE workers provided these payments are made on at least a quarterly basis.
- Keep in place the “duties test” that determines whether white-collar salaried workers earning more than the salary threshold are ineligible for overtime pay
Employers still have flexibility in choosing how they comply with the new rule. Permissible methods of compliance include raising salaries of primarily executive, administrative, or professional workers to at least the new threshold, paying overtime for hours worked in excess of 40 hours per week, or reducing overtime hours.
Article originally Published in Client Line