The big news last week was the Department of Labor’s announcement that it would increase the salary for employees exempt from the Fair Labor Standards Act’s (FLSA) overtime requirement from $455 per week ($23,660 annually) to $684 per week ($35,568 annually).
The FLSA requires employers to pay employees working more than 40 hours per week one and a half times their regular pay for each hour worked over 40. Employees making $455 per week or more were exempt from this requirement. Now that exemption has increased to $684 per week. The rule takes effect on January 1, 2020, a mere three months from now. What do employers need to do to get ready for it? Here are some of my suggestions:
- Prepare a list of potentially affected employees. Go through your payroll and find each employee performing white-collar duties who makes between $455 per week and $684 per week. Make sure that these employees are paid time and a half starting January 1.
- Consider increasing the salaries of the potentially affected employees. It may be cheaper to just increase their salary to $36,000 rather than having to pay them overtime. It will also save you the headache of keeping track of their hours and inadvertently violating the law.
- Do you know how to calculate overtime pay? The FLSA will require white-collar employees making less than $684 per week to be paid one and a half times their regular rate of pay for each hour worked over forty in a week. Regular rate of pay includes not only the employee’s base salary but also commissions, bonuses paid for productivity or performance, and increased pay for working on nights or holidays. It does not include reimbursements, employee benefit payments for things like health or life insurance, and sick, vacation, or holiday pay.
- Train your supervisors. Does the person performing payroll at your company understand the changes to the FLSA rule? Do they know who needs to receive time and a half?
- Tell affected employees. Explain to your employees who are now eligible for overtime pay how this will affect their pay and job duties.
Contact us for advice on implementing this rule change.