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Industry Outlook: Overtime Rules and Exemptions

By Jay Fisher | Human Resources Specialist

The United States Department of Labor has proposed a new rule concerning minimum salary and overtime exemptions. What does this mean for you and your company?

To put it simply, since 2004 any employee making less than $23,660.00 annually could not be made exempt from earning overtime. The new proposed rule – expected to go into effect in January 2020 – would raise this threshold to an annual salary of $35,308.00. If you currently have employees who make less than the new threshold and are exempt from overtime, you will need to change them to hourly when the new rule is enacted.

Conversely, the salary maximum is raising as well. The new threshold for highly-compensated employees will be raised from $100,000 to $147,414 a year.

Over one million employees are expected to be affected, many of which may be new to working by the hour. It is important to communicate these changes and explain to employees how this new rule may impact their pay. One major concern will be receiving a take-home pay that is less than what they currently make. It is imperative to explain that if employees work 40 hours during their standard workweek, their take-home pay will not be different. However, employees who work less than 40 hours may find the need to use paid time off (PTO) to make up the difference.

There are other restrictions to making an employee’s status exempt from overtime rules as well. Employees must be placed in one of the following categories:

  • Administrative– primary duties must be the performance of office or non-manual work directly related to the management or general business operations of the employer.
  • Professional– primary duties must be in a field of science or learning, requiring advanced knowledge and requiring consistent exercise of discretion and judgment.
  • Executive– primary duties must be managing the enterprise, department or subdivision.
  • Sales– primary duties must be making sales, or obtaining orders and contracts, and employees must be regularly engaged away from the employer’s place of business.
  • Computer – primary duties must consist of the application of systems analysis, design and development of computer systems or programs, or design and development of machine operating systems.

If you have employees who are making less than $35,308.00 annually or do not fall under the approved categories for exemption, they may not be eligible to work as salaried, exempt employees. As the new regulations near, Lever1 can you help navigate through all the rules to ensure that you and your company are in correct standing.