December 1st Overtime Rules are changing – are you READY?
Effective December 1st employees who are considered exempt from overtime must be paid at least $47,476 per year. Here is what you need to know.
Under the old Department of Labor regulations, the minimum salary a worker had to earn to qualify as exempt from overtime, was $455 per week or $23,660 per year. Effective December 1, 2016 the base salary increases to $913 per week or $47,476. If you pay a bonus, up to 10% of the salary threshold can be satisfied by the non-discretionary bonus. There is no option for part-time or half-time “exempt employees” – the minimum salary must be $913 per week.
Not everyone who makes $47,476 per year qualifies for the exempt from overtime status. There are criteria established by the Department of Labor the job must meet in order to be considered exempt from overtime. These rules have NOT changed but many employers are risking their business because they don’t know what they don’t know. Generally, these include:
- Exempt Executive – the primary duty is to manage a department or subdivision of the company. Customarily directs the work of two or more other employees. Has the authority to hire and fire employees.
- Exempt Administrative – Primary duty is to perform office or non-manual work. Exercises discretion and independent judgement with respect to matters of significance.
- Exempt Professional – Learned professional such as doctors, lawyers, physician assistants and some accountants.
- Creative Professional – Musicians, actors, artists and writers.
- Computer-related Professional – systems analyst, computer programmers, software engineer or similarly skilled professionals.
- Outside Sales – Sales people who are customarily and regularly engaged away from the employer’s place of business while selling or obtaining orders or contracts for services.
If you have employees who are not being paid overtime at time and one half their regular rate for hours worked over 40 each week AND they are not making at least $47,476 annually you will likely be out of compliance and subject to fines and penalties – including back-pay for at least 2 years.
Here’s how to make sure you aren’t at risk of those penalties and fines.
Do an audit of your jobs and the pay for each job. Review the job descriptions (make sure you have these on each job) and make sure they meet the criteria for the new threshold if they are exempt. AND make sure they are exempt – meeting the criteria from the Department of Labor.
If you have employees who are not at the salary threshold, you will need to either bring them up to the threshold OR convert them to hourly employees. Once they are hourly, you will need to pay them overtime for hours over 40 per week.
Have questions or if you would like an audit from Wise HR Partnerships to help you make this determination, call me at 704-650-8684.
Submitted By: Cristy Carroll, MA, SPHR
Owner of Wise HR Partnerships