Salary threshold increasing to $913 per week

The new overtime regs are here, and so are big changes for Payroll practitioners trying to comply with the Fair Labor Standards Act (FLSA).

For employees to be exempt from the overtime provisions of the FLSA, their wages will need to be at least $913 per week.

That $47,476 per year.

What’s more, the Dept of Labor (DOL) will automatically update the salary threshold every three years.

As for the duties test, no changes, says the DOL.

The final overtime rules takes effect Dec 1, 2016. That gives employers approximately six months to decide what to do about employees who currently qualify for the executive, administrative and professional FLSA exemptions but whose salaries will be below the threshold. Here are the primary options:

Limit employees’ time worked to 40 hours per week.

Pay time-and-a-half for hours worked over 40 in a workweek.

Raise salaries from the current minimum of $455 per week to the new minimum – which could mean more than doubling their pay.

Types of payments

It may help to know you can include bonuses, incentive pay and commissions when adding up employees’ salaries.

But there are a lot of caveats.

For one thing, those types of payments can count toward only 10% of the salary threshold.

The payments must be made on at least a quarterly basis.

You can’t include discretionary bonuses in your calculations, only non-discretionary bonuses.

Finally, the allowance doesn’t extend to highly compensated employees (HCE).

Note: The final rule also increased the total annual compensation level for HCE.

It’ll be a big jump, going from the current $100,000 per year to $134,004 per year – and as with the standard salary level, that amount will be subject to automatic increases starting in 2020.