On December 1, 2016, a revision to the overtime rules under the Fair Labor Standards Act will take effect, requiring employers to pay overtime to workers who make less than the specified weekly salary level, which is $913. Anyone who is classified as salary exempt and paid less than the salary threshold is protected under the FLSA and eligible to receive overtime for any hours worked over 40 in a week.
Overtime is defined as one and one half times the hourly rate of pay for each particular employee. The last time this type of adjustment happened to the FLSA was in 2004, when the standard salary was only $455 a week.
Who is affected by the overtime rule?
Employees who are classified as exempt from overtime when the Final Rule comes into effect in December will be in the spotlight; there are certain guidelines and measurements in place to make sure that the salary a worker is being paid is what the labor is actually worth. Both the standard basis test and the duties test are in place to make sure employees receive proper compensation for their work.
Anyone in the 40th percentile of full-time salaried workers is eligible for the new payment standard. The only exemptions to the salary basis tests are doctors, teachers, lawyers, and those who perform primarily executive, administrative or professional duties that comply with the duties test.
What should businesses do to prepare?
Many business owners and employers already have systems and policies in place to track which employees are eligible for overtime compensation. Each individual business should have a good idea of which employees will be protected under the new Final Rule, and how their record keeping process will be adjusted to fit the new regulations. If there are State Laws that are more stringent than the FLSA, the higher standard applies for that particular situation.
Businesses have the opportunity to use different techniques to make sure employees are being paid fairly, and that any hours that are considered overtime are being compensated according to the new standards. Some considerations for making salary adjustments; maintain current salary and provide bonuses quarterly, raising salaries of eligible employees, or reducing the base salary to a level that can pay an appropriate amount in overtime so that weekly pay stays consistent.
HR Solutions & Consultation in NH
Now that we know the results of the election, certain aspects of this coming law might potentially be subject to change. It’s important for employers to stay current on labor regulations and how they affect their business over the months to come.
There are many new standards and regulations that employers must know in order to comply with the Final Rule that comes into effect on December 1st. The purpose of the FLSA Final Rule is not to make employment difficult, but to protect the employees from being taken advantage of. Let HR Synergy help you with any questions or concerns you may have about how this Final Rule will affect you and your business. We can help you prepare and navigate through the changes coming in December!