The new overtime law goes into effect Dec. 1, and there’s a very good chance your company will be impacted. Designed to ensure employees are properly compensated, the financial implications of this new rule could seriously tighten your budget. If your employees regularly put in extra hours — more than 40 hours of work per week — you’ll be required to pay overtime to those earning less than $47,500 annually.
Under the current rule — which has been in place since 2004 — you’re able to classify employees earning more than $23,660 per year as exempt, making them ineligible for overtime pay. However, this will soon be a thing of the past, with the exception of those who qualify for a white collar exemption.
Key Provisions of the New Overtime Law
- The new standard salary level will increase to $913 per week — $47,476 per year — from the previous $455 per week — $23,660 per year.
- Salary and compensation levels will be updated every three years thereafter, to keep pace with economic standards. The next increase will take place on Jan. 1, 2020 and the salary level is expected to reach $51,000.
- Previously outlawed, employers will now be permitted to satisfy up to 10% of the standard salary level with nondiscretionary bonuses and incentive payments, assuming these payments are made at least quarterly.
- The annual salary requirement for highly compensated employees (HCEs) will increase from $100,000 to $134,004 per year — the equivalent of the 90th percentile of full-time salaried employees in the U.S.
Occasionally paying a few hours of overtime probably won’t impact your bottom line, but if this new rule means you’ll be shelling out thousands extra per month, it’s time to make a change. This means you’ll either need to raise employees’ annual salaries above $47,476 or hire more people. There’s plenty of hiring options to choose from — temporary, temp-to-hire or direct hire — so work with your staffing partner to find the right solution for your company’s needs.
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