Posts Tagged ‘Fair Labor Standards Act’

The Overtime Final Rule – What’s it Mean to Me?

May 26th, 2016

The Overtime “Final Rule” signed by President Obama last week will have a significant impact on employers, as an estimated 4.2 million workers will become eligible for overtime when the law goes into effect on December 1, 2016. The greatest impact will be on employers whose employees are earning salaries just above the former standard of $455 per week. Below is a Q&A, adapted from FAQ’s created by the Department of Labor (DOL), to help employers create a strategy for dealing with this new legislation.

  • What is the purpose of the new Overtime Final Rule?
    • The main purpose of the Final Rule is to update the regulations that determine whether white collar, salaried employees are exempt from the FLSA’s minimum wage and overtime protection. The regulations were last updated in 2004, when the standard “exempt” salary level was set at $455 per week. The new ruling increases the weekly standard salary to $913 per week or $47,476 per year for a full-time worker. 10% of this amount may come from “non-discretionary” bonuses. This would include commissions or established bonuses based on quotas, etc. and paid at least quarterly, but would not include spontaneous/unplanned merit or performance bonuses. The Final Rule includes provisions for the standard exempt salary to be updated every three years. The ruling does not change the standard duties test, identifying terms by which executive, administrative, or professional employees may be considered exempt. The main purpose of the final ruling is to update the wage requirement for overtime exemption, which in effect increases the number of U.S. workers who are eligible for overtime.

 

  • How do I determine if my employee is exempt?
    • To qualify for exemption, a white collar employee must:
      • be paid a salary – a fixed amount not impacted by quality or quantity or work performed
      • be paid more than $913 per week ($47,476.00 annually)
      • perform executive, administrative, or professional duties as described in the Department of Labor’s duties test (found of the DOL website).
    • In addition, the DOL regulations provide exemption for certain highly compensated employees who earn above an annual compensation of $134,004 under the new rule, and satisfy a minimal duties test.

 

  • How will employers adapt to the changes in the Final Rule? 
    • Employers have a range of options for responding to the updated standard exempt salary level. Some of these options include:
      • increase the employee’s salary to the new standard salary in order to maintain exemption for a currently exempt employee
      • pay overtime at one and a half times the employee’s regular rate for any overtime worked
      • reduce or eliminate overtime hours
      • reduce base salary (as long as employee still earns minimum wage) and pay overtime for any hours worked over 40 each week
    • The response of the employer will be dependent upon each individual employee’s circumstances. Employers may give raises to those close to the new standard salary, maintaining their exempt status, while choosing to pay occasional overtime to those lower-salaried employees who rarely work overtime. It is important to note that nothing in the ruling requires employers to switch newly “non-exempt” employees to hourly. They can remain on salary, but must be paid overtime if working over 40 hours per week. Employers may use the same means to track overtime as they use for hourly employees. (Ask AccuPay if you need help with timekeeping services.)

 

  • Who is covered by the FLSA and required to comply with the Final Rule?
    • The FLSA or Fair Labor Standards Act, establishes minimum wage, overtime pay, recordkeeping, and youth employment standards for employees in the private sector as well as in Federal, state, and local governments. In general, employees of enterprises with an annual gross volume of sales made or business done of $500,000 or more who “engage in commerce or in the production of goods for commerce” are covered by the FLSA. Employees of hospitals, businesses providing medical or nursing care, schools (both for profit and not for profit) and government agencies are covered regardless of sales/income. Individuals may be covered by FLSA even if the business is not. For example, if individual employees initiate interstate commerce, such as ordering supplies, he or she may be eligible for FLSA protection even if the business is not.
    • Non-profits and/or their employees, are likely subject to FLSA, although it is possible some smaller non-profits and churches are not. The DOL will be conducting a webinar for non-profits pertaining to the Final Rule on Tuesday, June 7. Visit the DOL website to register. Determining exemption from FLSA is something that must be carefully considered. Churches and non-profits should review all of the guidelines carefully in light of their specific circumstances before making such a determination. There is no “blanket” exemption for non-profits or churches when it comes to the FLSA, and penalties for non-compliance can be severe.

 

Depending on your workforce, the Final Rule could be significant for your business and your payroll costs. It is important to plan now for how you will implement that new rules when enforced in December. For more information, you can sign up for free webinars conducted by the Department of Labor at https://www.dol.gov/whd/overtime/final2016/webinars.htm. If you would like more one on one assistance, try out AccuPay’s HR Support Center. Our HR On Demand service connects you with an HR expert who can help you navigate the new FLSA rules. These experts are available to you on an unlimited basis for just $40 per month, which includes access to the HR Support Center that is full of resources and information on this and other HR topics. Contact Accupay today for more information at 317-885-7600.

 

PayDay is an email communication of payroll news, legal updates and tax considerations intended to inform clients and colleagues of AccuPay about current payroll issues and planning techniques. You should consult with your CPA, tax, HR or legal advisor before implementing any ideas, comments or planning techniques.

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