PROPOSED CHANGES TO OVERTIME WAGE PAYMENT

In 2015, the U.S. Department of Labor (DOL) released a proposed rule that would alter overtime wage payment. The new rule would have a significant impact on employees, since doubling the salary threshold that employees must meet to qualify for the overtime wage payment exemption could affect 11 million employees in the United States.

What could change?

Federal law requires that eligible employees be paid time and a half for all hours worked over 40 in a workweek. Not all employees, though, are currently eligible for overtime pay. For instance, certain jobs like executive, administrative, professional, outside sales, computer employees and some highly compensated individuals are not eligible for overtime pay.

Currently, the salary threshold established by the government for overtime pay is $23,660 a year or $455 per week. The proposed rule would more than double the salary threshold to $50,440 per year or $970 per week.

The new rule would also increase the $100,000 salary threshold for highly compensated individuals to $122,148—the 90th percentile of wages earned by workers in 2013. This figure is expected to increase by the time the final rule is released in 2016.

Why was the proposed rule introduced?

The DOL proposed changes to overtime regulations due to concerns that the regulations were outdated. The salary thresholds have only changed twice in the past 40 years. For instance, in 1975, more than 60 percent of salaried workers were eligible for overtime pay. Now only 8 percent of full-time, salaried workers are eligible.

The Obama administration estimates the new rule could cost employers between $240 million and $225 million per year. Business leaders, though, anticipate the costs could be even higher.

How could this change affect me?

If implemented, the new overtime regulations may impact whether you’re eligible for overtime pay. This determination would be based on a variety of factors, including your annual salary and the type of work you perform. Overtime regulations are complex, so there are many caveats to whether you are considered eligible.

In addition, if implemented, the proposed rule would force employers to re-evaluate their overtime pay policies, assess employees’ salaries, review employees’ exempt status, adjust payroll systems and analyze workflows—all of which may affect your ability to earn overtime pay.

What is the outlook of the proposed rule?

A final rule is expected by July 2016. While it is possible that the 2016 elections could change some aspects of the new rule, it is highly likely that overtime pay changes will still be implemented in some fashion.