Department of Labor’s recent proposal about a tweak in the overtime rules could imply that a significant number of Americans become eligible for overtime pay. The threshold for overtime pay that has been in vogue since 2004 is set to undergo a change. The threshold of salary is proposed to be enhanced from $455 per week to $679 per week. So, according to the proposal, employees become eligible for overtime pay if they draw a salary of less than $679 per week. This is set to significantly bump up the business cost. What is even more worrying for businesses is that the proposal also includes a change in the salary threshold for exemption of Highly Compensated Executives from overtime payments. This is set to increase the HCE threshold from $100,00 to $147,414. This implies that around 200,000 HCEs, who are currently outside the purview of overtime payment, would also become eligible for overtime pay.
For now, employers may not worry too much since the pace of happenings, in government quarters, especially regarding enacting or updating rules, is way too tardy. However, employers need to have a look at the number of their employees and their job profile to determine as to how many of them would become eligible for overtime. You may increase wages beyond the threshold so that you don’t need to pay overtime. You may also change the terms of the nondiscretionary bonus plans.
Job Duties Test
A job duties test? Yes, this is important, and this can be the saving grace for you. Overtime payment is not for everybody. Anybody qualifying for overtime payment has to pass the job duties test. This is a constant feature of the payment of overtime rules and is not undergoing any change. This is a tool to test whether one or several of your employees qualify for an exemption or not under the Fair Labour Standards Act. If you want to make as many employees immune from this new proposal you need to take a job duties test. You will benefit if more employees than before become exempt from overtime payment. So, this is also a good time to do a self-audit. Look at your workforce to see if the employment classification is alright. In fact, it is not just the salary threshold, but also the job profile.
Exempt Or Non-Exempt
Classifications of an employee as exempt or nonexempt are done as per the FLSA. Type of payment and rate of payment are two important criteria to determine one’s status as Exempt or Non-Exempt. However, the type of work is also an important criterion for employee performance. Needless to say that most employees are non-exempt and qualify for overtime pay. To classify employees in your organization for exemption from overtime pay, you need to satisfy these criteria.
- The employee must earn a salary
- The salary must be equal to or more than $679 per week
- The employee must perform some exempted job duty
You can make some people exempt by a tweak in their job duties and protect your business from an unexpected bump.