The U.S. Division of Perform (DOL) has released new rules regulating overtime for salaried employees, which will instantly increase qualifications for overtime for salaried employees to an approximated 4.2 thousand workers. Under the new rules, which will take influence on Dec 1, 2016, most paid workers making less than $913.00 per week ($47,476.00 annually) will be eligible to gather overtime for salaried employees. This recently recommended salary level is more than double the present quantity ($455.00 per week or $23,660.00 per year) at which workers usually are regarded exempt from the overtime rules.
A brief review of the Reasonable Perform Requirements Act (FLSA) is useful in understanding what is going on here. The FLSA necessitates that companies pay their employees at least the federal lowest salary (currently $7.25 per hour) forever worked well and overtime for salaried employees at the interest amount of 1.5 times their regular amount of pay forever worked well too much of 40 in a workweek. Certain types of workers are excused from protection under the Act, such as physicians, attorneys and instructors. In addition, the FLSA exempts from protection employees who are involved in an “executive, management or expert capacity”. Such workers have been traditionally referred to as “white receiver workers”. The Act itself, however, does not determine the terms “executive”, “administrative” or “professional”, making it to the DOL to issue rules interpreting the opportunity of these exceptions.
The present DOL rules require that a worker fulfill each of the following three assessments in order to fall within the white-colored receiver exemption. He/she is paid a pre-specified and glued salary that is not susceptible to reduction for the quality or quantity of labor performed (the “salary foundation test”); the level of the worker’s salary satisfies a lowest specified quantity (the “salary level test”); and, the worker’s responsibilities involved expert, management or expert responsibilities, as described in the DOL’s rules (the “duties test”). The recently released rules effect the second of those assessments, the “salary level test”.
So, beginning Dec 1, when the new rules be effective, most of the white-colored receiver workers making less than the “standard salary level” of $913.00 per week will be eligible to overtime for time worked well too much of 40 in a given workweek. That will be the case regardless of whether these employees fulfill the other two assessments for the white-colored receiver exception to this rule. This conventional salary level was determined according to the Fortieth percentile of income of fulltime paid workers in the cheapest salary area in the nation, currently the South. The common salary level will hereafter be susceptible to modification every three decades, again, by mention of the Fortieth percentile of fulltime paid workers in whatever is then the cheapest salary area in the nation.
Employers will be allowed to use nondiscretionary additional bonuses and motivation expenses (such as commissions) to fulfill up to ten percent of the regular salary level, provided these debts are paid on an every three months or more frequent foundation.
Lastly, the new rules also effect those who are regarded to be “highly paid employees” under the Act. Currently, employees whose yearly income are $100,000.00 or more are usually exempt from the overtime rules, even if they do not fulfill the “duties analyze.” When the new rules go into effect, the appropriate quantity of money to become qualified as an HCE will increase to $134,004.00.
The DOL reports that approximately 4.2 thousand workers who are currently regarded exempt under the FLSA will become eligible to overtime in the 1st season of execution of these new rules. That number is expected to expand to more than 5 thousand workers within a decade of execution. An additional 65,000 HCEs are approximated as being eligible for overtime in the 1st season following the guidelines change, with 200,000 being affected within a decade.
Clearly, many companies will be affected by these changes and companies are well advised to keep yourself well informed to how these new rules will affect their pay-roll methods.