The Department of Labor’s annual salary threshold for overtime pay is about to double for those staffing white collar employees, from $23,660 (the threshold now) to $50,440 (beginning in 2016). The news sent shock waves throughout the business community. But what does it really mean? Let’s break it down into the top 10 points you need to know when staffing your business.
- The proposed rule applies to employees of enterprises that have an annual gross volume of sales made, or business done, of $500,000 or more and certain other businesses. Essentially, these are the same businesses affected by Fair Labor Standards Act (FLSA), including nonprofits.
- The law change extends overtime protections to nearly 5 million white collar workers. According to state-by-state calculations, it affects just three percent of Texas workers.
- Unless exempt, employees covered by the FLSA must receive overtime pay for all hours worked over 40 in a workweek at a rate not less than one and one-half times their regular rates of pay.
- Exempt white collar workers include most executive, administrative, professional, computer and outside sales employees. Check here for those definitions.
- Computer employees? Maybe. Exempt employees can include computer systems analysts, computer programmers, software engineers or other similarly skilled workers in the computer field performing specific duties, with a few exceptions.
- There is no salary level test required to qualify as an exempt outside sales employee. Certain professionals including doctors, lawyers, and teachers are also not subject to the salary level test.
- Nondiscretionary bonuses (such as production or performance bonuses) are currentlynot considered part of the proposed salary test.
- “The Department of Labor may be over reaching,” points out HR expert Caroline Valentine, “but it’s pointing out a very serious problem: Who has employees working 60 hours a week at $23,000 a year?”
- Those making only slightly above $50,440 may be covered in the near future.According to the Wall Street Journal, the Department of Labor wants to index the salary threshold so that it automatically rises over time, perhaps by tying it to the inflation rate. In previous rule changes, that provision wasn’t included, and so the real value of the threshold eroded.
- The Department of Labor is also proposing to set the “highly compensated employee annual compensation level” at $122,148 (from $100,000) for retirement plan discrimination testing purposes. This amount would also be adjusted annually.
Whatever your reaction, it’s hard to argue that change is inevitable when it comes to staffing your business. In 1975, more than 60 percent of salaried workers were eligible for overtime. Today, less than eight percent of full-time salaried workers are covered by those regulations.
Where do your employees fall on the scale?
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