While politicians debate changing minimum wage, new overtime rules from the Department of Labor (DOL) may affect business far more. The regulations, which go into effect on December 1, 2016, will add overtime pay eligibility for an estimated 4.2 million employees — about 1.2 million in Texas. This marks the first significant change to the country’s white-collar overtime rules in more than 40 years.
Here’s an overview:
- The rules raise the salary threshold for overtime eligibility from $455/week ($23,660/year) to $913/week ($47,476/year), an increase of 101%.
- The salary threshold automatically increases every three years, based on wage growth over time.
- The regulations strengthen overtime protections for salaried workers already entitled to overtime.
- The rules are simpler and easier to understand for employees and employers.
Employers have several options for maintaining compliance with the rules:
- Raise salaries. If current exempt employees’ salaries are close to the new minimum, the simplest solution may be to bump them to $47,476/year.
- Pay time and a half for time worked over 40 hours per week. Employers can convert lower-paid salaried employees to nonexempt status and pay overtime. An hourly pay rate can be easier to track than an annual salary, so consider that conversion, as well. Be sure to implement a policy of getting supervisory approval in advance of overtime. Remember, however, that employees must be paid for all time worked, even if they violate the policy.
- Adjust hours and hire more people. Companies may choose to limit employees to 40 hours per week and hire additional workers to cover work beyond those hours.
Whichever option or combination of options you choose, you likely will have to make some adjustments to other policies and procedures like benefit structures, time tracking, and flexible schedules. An attorney specializing in labor and employment law can help you prepare for the new regulations, including ways to explain changes to employees and minimally impact day-to-day business.
Visit the Department of Labor website for complete information about the new overtime rules. And don’t hesitate to call us for assistance.