Smart, Easy Ways to Manage the Change.
It’s true. The long awaited overtime changes are here. This past May 18th, the Department of Labor released its final decision – doubling the salary level that determines whether employees are classified as exempt from overtime under the Fair Labor Standards Act.
These rules effect close to 5 million workers. Even more pressing, the rules become active on December 1st of this year. That’s just over 1 month away.
First, Here’s A Brief Snapshot.
We know. It can feel a little overwhelming. But, the numbers are actually pretty straightforward. Here’s what these new guidelines look like.
- The new annual minimum salary threshold has been increased to $47,476 from the old level of $23,660. That’s about $913 a week, up from $455.
- The new rules call for automatic increases to this threshold every three years – based on current projections, the salary threshold could rise to over $51,000 at its first updated on Jan. 1st, 2020.
According to the Federal Government, these new FLSA rules will grant overtime rights to approximately 4.2 million American workers currently excluded. If some of those workers are showing up to your office everyday – there are some essential changes you should take to meet the new requirements.
What are Exempt and Non-Exempt?
There are two employee classes. This is what they look like:
Non Exempt: Most employees are entitled to overtime pay under the Fair Labor Standards Act. These are classified as non-exempt employees. That means, as an employer, you are required to pay 1.5 times their hourly wage when these employees work more than 40 hours per week. It’s easy to miscalculate the overtime owed – and very important to get this right.
Exempt: Exempt employees are paid a salary instead of an hourly wage. The Fair Labor Standards Act contains dozens of categories wherein employers and employees are exempted from overtime requirements. The biggest benefit? You don’t have to track hours or pay overtime – no matter how much your employees work.
So, by raising the minimum exempt salary, the Fair Labor Standards Act may effect how much you pay your employees, and it also may change how you classify your employees. In order to make sure you and your employees are all taken care of, you will want to reevaluate their hours worked, and assess whether some employees will need to be reclassified.
Why it’s So Important to Get It Right…
We know. It’s tough. These rules significantly effect workers, and put a particular pressure on small businesses, higher education, and nonprofits. However, it’s worth dedicating some time to getting this right the first time out. If you fail to pay the correct overtime amount, or you accidentally misclassify an employee, you may face consequences and penalties.
For example, if you’ve misclassified employees as overtime exempt, you will owe them for all actual hours worked and all