As of December 1, 2016, new rules will be used to determine and regulate the overtime pay of employees covered by the Fair Labor Standards Act (FLSA).
The following are a few of the changes that the new rules will impose:
- The minimum salary requirement for an employee to be considered exempt will increase from $23,660 to $47,476. As such, if an employee earns less than $913 a week, he or she cannot be considered exempt.
- In order to be considered a HCE (highly compensated employee), the employee’s salary must be over $134,000 a year, as opposed to the former minimum of $100,000.
- As of January 1, 2020, the minimum rates for both the HCE and standard employees mentioned above will be adjusted every 3 years. The newly calculated rates will be made public by the Department of Labor 150 days in advance. A new rate can be expected to be posted on August 1, 2019.
- Up until now, employers have been required to pay the entire salary level by the end of each pay period. Starting December 1st, employers will be able to contribute up to 10% of their payment to their employees for non discretionary bonuses and earned commissions.
The FLSA overtime rules apply to nearly all hourly and salary-based employees. However, they do not apply to executive, administrative, and professional employees who comply with all three of the following conditions:
- The employee earns a fixed salary that cannot be reduced due to the variations in the work completed.
- The amount of salary earned by the employee meets the minimum amount required (the employee must earn at least $913 per a 40-hour work week).
- The employee’s work performed consists of mostly executive, administrative, or professional tasks.
In order to ensure compliance with the new rules, employers can either pay overtime, eliminate the need for their employees to work overtime, or raise their employees’ salaries to meet the new minimums.