Overtime and The Effects on Your Dime [Infographic]

by Rachel Bailey May 29, 2016 Follow @rachelb414

May 29, 2016

The Department of Labor (DOL) issued its updates to the Fair Labor Standards Act (FLSA) overtime provisions on May 18, 2016. The Final Rule:

Updates the white collar exemption to $ 47,476 from $ 23,660 per year
Revises the annual compensation requirements necessary to be considered for the Highly Compensated Employee (HCE) exemption testing from $ 100,000 to $ 134,004.
Provides for automatic adjustments to the white collar exemption and HCE compensation levels every three years

These changes are ones that most employers, whether for- or not-for profit, will have to incorporate into their business planning. The FLSA applies to employers of businesses that have gross volume sales made or business done of $ 500,000 or more.

The current salary threshold for the white collar exemption was last set in 2004. At its current rate of $ 455/week or $ 23,660/year, it is below the 2015 poverty line for a family of four. The DOL has chosen to set the new threshold at the 40th percentile of earnings of full-time salaried workers in the lowest wage Census Region. This results in a new wage exemption of $ 913/week or $ 47,476/year.

For the first time, employers will be allowed to count a portion of nondiscretionary bonuses, commissions and incentive payments towards this amount. The Final Rule allows for payments of this kind to make up to 10% of the standard salary requirement as long as these types of compensation are paid at least quarterly. Salaried and hourly workers paid below the threshold amount are generally eligible for overtime when they work more than 40 hours per week.

So that the new overtime threshold does not become outdated, the Final Rule allows for automatic updates every three years. Updated figures will be calculated based off of taking the 40th percentile of earnings of full-time salaried workers in the lowest wage Census Region. The next update to the white collar exemption will occur on January 1, 2020. The updated numbers will be published 150 days prior to the effective date.

Take a peek at the infographic below to get a better (visual) understanding of the new rules and how they might affect your business.

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