DOL Increases Overtime Salary Exemption By 50%

The much-anticipated Department of Labor (DOL) final overtime rule was issued September 24, 2019 and is set to take effect January 1, 2020. The rule changes the salary threshold that must be paid to an exempt-level employee in order to remain exempt from overtime pay. (The duties tests that existed before are still in place.)

Prior to the rule, the maximum weekly salary to remain exempt was $455.00 ($23,660 annually). Beginning January 1, 2020, this now increases to $684.00 per week ($35,568 annually). Though the increase is significant, it’s still much less than what was proposed by the DOL during the Obama Administration in 2016, which was later blocked in the courts.

We’ve created the following infographic to help you easily understand the changes.

Click here to download this as a printable PDF.

Unlike the 2016 overtime rule proposed by the Obama Administration, this one does not have an automatic increase provision. It does, however, include some of the same features, viewed as positive by many HR professionals, such as allowing non-discretionary bonuses and other types of pay to count toward the annual basis (but only up to 10%).

What does the updated overtime rule mean to your business? And what is your next step?  

This is a great time to review current job descriptions and pay rates, and begin to develop a plan for how you will move forward into 2020.

Many employers will opt to transition a current exempt-level employee to an hourly employee and keep them at the same hourly equivalent rate of pay. This strategy may make sense for your organization, but only if your current salary employees don’t often work over 40 hours in a week.

For mid-level managers who consistently work more than 40 hours, you may need to consider raising their salary to exceed the new rate.

There is no cookie-cutter answer for what to do, except to begin keeping accurate time records of hours worked for all employees.

One thing is certain: this is the time for your HR team to step up and help you manage this change. How the overtime rule is communicated to your employees will make the difference between whether your staff accepts this change happily or not.

By the way, this overtime rule is just one of more than 2200 employment-related regulations that business owners need to follow. But that’s why we exist! Payday alleviates the headaches of running your business by becoming your comprehensive HR solutions service. In other words, we know all the rules and keep you in compliance, so you can get back to doing what you do best. Discover how much time, money and headaches we could save you.