Are You Ready for New Overtime Rules?
This week we fill you in the U.S. Department of Labor’s latest proposed rules for overtime pay.
Proposed rules introduced during Obama administration created quite an uproar among employers — not surprisingly, considered that they were expected to make more than 4 million salaried workers newly eligible for overtime. A federal district court judge halted those rules days before they were due to take effect.
The existing rules haven’t been updated since 2004, though. Now the Trump administration is taking a swing at revising them, issuing a proposed rule that would make about 1.3 million “white-collar” employees currently exempt from overtime nonexempt. The proposed rule wouldn’t only potentially increase your compensation and administrative expenses; it also could hike your payroll tax liability.
Under the current regulations, an employer generally can’t classify a white-collar employee as exempt from overtime requirements unless he or she satisfies three tests:
- Salary basis test.
The employee is paid a predetermined and fixed salary not subject to reduction due to variations in the quality or quantity of the work performed.
- Salary level test.
The employee is paid at least $455 per week (or $23,660 annually).
- Duties test.
The employee primarily performs executive, administrative, or professional duties.
The proposed rule would raise the standard salary level threshold to $679 per week (or $35,308 annually) for the executive, administrative, and professional exemptions. It also increases the total annual compensation requirement for highly compensated employees (HCEs) to $147,414 — a big jump over the current level. Both of these salary threshold increases likely would result in more overtime-eligible HCEs.
To learn more about how things could change — and what you can do to prepare — check out our latest article: