Thursday, May 12, 2016

What You Need to Know About Overtime Rules

The Department of Labor’s (DOL) proposed changes to the overtime rules is expected to be released as early as this month – under the Fair Labor Standards Act.

The proposed rules bump the salary threshold for overtime-exempt employees from $23,600/year to $50,440/year. If the final rules stay the same as the proposed rules, employees currently working in overtime-exempt positions who make less than $50,440 will now be entitled to overtime pay.

It’s possible the final rules could include a lower threshold – $47,000/year instead of $50,440 – but even if that’s the case, it will still mean a big jump. Employers will have to decide whether to increase workers’ salaries to make them exempt from overtime or reclassify them as non-exempt.

And since many employers have different benefit structures for hourly and salaried workers, if some employees need to be reclassified as non-exempt they could see their benefits affected.

So what do you need to know about overtime rules?

This proposal represents a 113% immediate increase plus an annual increase. The proposed overtime rule would initially raise the salary threshold defining which employees must be paid overtime by 113%, from $23,600 to $50,440. In addition, the DOL has proposed increasing this minimum salary on an annual basis.

The proposal will impact millions of workers and cost billions to businesses. According to the DOL, the rule will affect over 10 million workers – workers who may see their workplace flexibility diminished or a loss in other benefits they rely on, says the Partnership to Protect Workplace Opportunity (PPWO). The National Retail Federation estimates retail and restaurant businesses will see an increase of more than $8.4 billion per year in costs.

The implementation window is very short. As proposed, the implementation timeline for this rule is only 60 days, which will place a massive burden on HR departments and organizations scrambling to comply, according to the PPWO.

Many employees will need to be demoted. This change could force employers to reclassify professional employees from salaried to hourly – including many managers and those with advanced degrees – resulting in a loss in benefits, bonuses, and flexibility, and a reduction in professional opportunities.

Scot Dickerson, CPC | President | Capstone Search Group