Required Overtime Pay for Certain Employees

Educational Articles | 05.19.2016

A decision made by the Department of Labor this week could have a big impact on more than 4.2 million workers. The Final Rule, which will go into effect December 1, 2016, will require salaried employees making less than $47,476 annually (or $913 per week) to be paid overtime wages.

The biggest changes you will see with the Final Rule are:

  • The standard annual salary level is more than doubling from $23,660 to $47,476. ($455 per week to $913 per week)
  • The threshold for what is considered a Highly Compensated Employee (HCE) is being raised from $100,000 to $134, 004.
  • An automatic system will be put in place to update these salary levels every 3 years beginning January 1, 2020. This will allow for automatic updates to the salary levels for inflation and cost of living increases.
  • Employers may use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

Generally, affected employers have a few options on how to handle these new changes:

  • Limit your current salaried employees to 40 hours per week.
  • Raise the current salaries of your workers to or above the $47,476 threshold.
  • Pay overtime (time and one half the regular hourly rate) to any salaried employees who work more than 40 hours in a given week.

For more information on the Final Rule, visit the Department of Labor’s website, which includes text of the complete law, helpful Fact sheets and FAQ’s. If you have questions about how these tax changes might affect you, your family, or your business, call Burkett Burkett & Burkett, Certified Public Accountants, P.A. for more information.

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