Finance News & Insights

New OT salary threshold released: Here’s the new number

It’s finally here! After years of waiting and more than 200,000 public comments, the Department of Labor (DOL) just released the proposed rules overhauling the federal overtime system.

The new overtime threshold will be $35,308. which breaks down to $679 a week.

And that’s not the only change in store for you.  The proposed rules also adjust some other key portions of your company’s compliance.

Here’s a rundown of the new rule, what it means to your business and your best first steps to prepare.

Change 1: The salary threshold

That new number is up from the current $455, set back in 2004.

Of course that’s significantly short of the $47,476 annual threshold passed by the Obama administration. It’s estimated that half the employees who would’ve been OT-eligible at the 2016 number will no longer qualify. But it’s still going to cost you.

At least now you can actually start to figure out by how much. Hopefully, you’ve already been doing some scenario planning with several different possible salary thresholds.

Now that you no longer need to speculate, have Payroll run a report on every employee who falls between the soon-to-be old $23,660 threshold and the new $35,308 threshold.

That way you can see how many more people will be overtime-eligible.

And you can start asking the tough questions, like if you have employees who are butting up against the new number, does it make sense to bump up their salary once to avoid an ongoing time-and-a-half responsibility?

There are other questions coming too. You can bet employees will immediately start asking you, Payroll and their supervisors about what’s going to happen, so you want everyone to have answers.

Change 2: Who’s highly compensated

While the new threshold came in pretty close to what had been predicted (see C&CA 1/30/19), there was another change in the proposed rules not everyone saw coming.

The Department of Labor will also increase the total annual compensation requirement for “highly compensated employees” (HCE).

And it’s a biggie. Instead of the current $100,000, the new requirement will be $147,414 annually. That’s even higher than the $134,004 that was passed under Obama in 2016.

As you re-evaluate who’s eligible for what, there’s another big change to take into consideration.

Under the proposed rules, your company can use nondiscretionary bonuses and incentive payments (including commissions) that are paid annually or more frequently to satisfy up to 10% of the standard salary level.

What’s not changing

That’s a lot to get used to in a short time. While no official effective date has been set, things will move quickly to get the changes in place before the 2020 election.

Fortunately there are a few things on the overtime front you won’t have to worry about, as the DOL announced it won’t change:

  • the job duties test, and
  • overtime protections for key groups of workers, from police officers to nurses to non-management production-line employees.

Nor will you have to worry about all the rules shifting out from under you like clockwork – the proposed rules say there’ll be no automatic adjustments to the salary threshold.

Stay tuned. CFO Daily News will update you as soon as an effective date gets announced.

 

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