H2R CPA Blog

Updated Overtime Rule

by H2R CPA Team

On May 18, 2016, the US Department of Labor issued a Final Rule updating the Fair Labor Standards Act (FLSA) salary level above which certain white collar workers may be exempt from overtime pay requirements (time and one-half) when working more than 40 hours per week.

Important features of the Final Rule are as follows:

  • Changes take effect on December 1, 2016, raising the overtime salary level for the first time since 2004.
  • Raises the overtime salary threshold from its previous amount of $455 per week (the equivalent of $23,660 per year) to a new level of $913 per week (the equivalent of $47,476 per year).
  • Updates the total annual compensation level for Highly Compensated Employees above which most white collar workers will be ineligible for overtime from the current $100,000 to $134,004 a year
  • Establishes a mechanism for automatically updating the salary and compensation levels approximately every three years, with the first update to take place in 2020.
  • Allows up to 10 percent of the salary threshold for non-HCE employees to be met by non-discretionary bonuses, incentive pay, or commissions, provided these payments are made on at least a quarterly basis.
  • Does not make any changes to the “duties test” that determines whether white collar salaried workers earning more than the salary threshold are ineligible for overtime pay.
The Department estimates that the Final Rule will automatically extend overtime pay eligibility to 4.2 million workers. Organizations may ensure compliance for those employees affected by the Final Rule in a number of ways. Some options for employers include:

  • Raise salaries to maintain exemption
  • Pay current salaries, with overtime after 40 hours
  • Reorganize workloads, adjust schedules or spread work hours
  • Adjust wages

For more detailed information, see the US Department of Labor publication, “Guidance for Private Employers on Changes to the White Collar Exemptions in the Final Rule.”

At H2R CPA, we can assist you in ways to strategically plan for how to minimize the costs of this change. If you need help in addressing this challenging regulation, contact us at 412-391-2920 or team@h2rcpa.com.

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