DOL Overtime Rule and How it Impacts Your Small Business

 

overtime payOne of the biggest changes as a result of the DOL (Department of Labor) ruling is a mandated increase in the minimum salary level that businesses must pay salaried employees.  The new regulation goes in effect December 1st 2016 and raises the minimum salary to $47,476 from $23,660 annually. Revisions to the mandatory threshold for exempt employees will happen every 3 years with the next change in 2020.  The salary level can include commissions and bonuses, however they can only make up 10% of the minimum salary requirement.

Compliance to this rule will be checked quarterly which means that the total amount paid to an exempt employee needs to be greater or equal to 1/4th of annual amount.  If not, the employer must pay the difference in the next pay period.  Small businesses should consider paying annual bonuses and commissions quarterly to be sure you are in compliance at the end of the year.

For non-salaried employees, the cap on overtime eligibility more than doubles under the new rules.  Currently, many workers are cut off from overtime compensation once they reach $23,600.  Now, all workers making up to $47,476 are no longer exempt from the overtime rules.  Below are some steps you can take to remain compliant under the new DOL rules:

Consider Re-classification – Identify currently exempt employees making less than $47,476 (including bonuses) and either bump up their salary, change from salary to hourly or change the incentive structure.

Policy and Processes Review – After re-classification, review your business’s processes such as timekeeping, changes in payroll, and possibly limiting the number of overtime hours employees can work. 

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