In early March, the Department of Labor (DOL) Wage & Hour Division issued some proposed changes to the overtime rules. These rules have been relied upon by the payroll industry for several years to determine who can be a salary, exempt employee and who should be paid overtime wages. Back in 2016, the Obama administration proposed similar types of changes. Employers were up in arms over the impact of these changes in terms of the added costs associated with paying previously exempt employees overtime wages. The 2016 ruling was overturned in the 11th hour, but not before many employers had already made changes to accommodate the new salary thresholds.
Also included in the prior ruling were changes to force automatic increases in the salary thresholds. The new regulations notably omit these automatic increases. So what is included?
- The minimum salary exemption went to $35,308/year, up from $23,600/year. The prior ruling attempted to take this to $47,476/year. That is over $12,000 less than before. The Obama administrative ruling was about a 100% increase, whereas this new ruling only increases the threshold by about 50%.
- The new proposed ruling allows employers to pay out up to 10% of the annual salary in nondiscretionary bonuses, commissions or incentives. It’s likely that employees terminated mid-year will need a payout at termination to get them caught up in situations where the employee did not receive some type of end of year bonus.
- Highly compensated employees would now be defined as employees making in excess of $147,414, previously this was $100,000. The prior ruling took this to $134,004.
The DOL then opened up a comment period once the ruling hit the Federal Register in late March, after the proposed ruling was released. The comment period was opened for 60 days. As of mid-May, the DOL had already received over 57,000 comments. This demonstrates the volatility of this proposed rule to the payroll industry. The comment period closed May 21st. These comments can be seen here.
Integrity Data is your partner in payroll compliance and will continue to keep you updated on overtime changes or others in the industry that could affect your payroll team and your employees. Remember, if you are using Microsoft Dynamics GP payroll, our Overtime Hours Rules product can ease the burden of ensuring the correct number of overtime hours are paid out to your employees. This is especially helpful for the State of California customers that have to deal with double-time and seventh consecutive day overtime rules.
Don’t hesitate to contact us with any questions about your payroll, or to get more information about how we can help.