How the New DOL Overtime Laws Will Impact Your Payroll

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Thanks to the Department of Labor’s (DOL) new overtime rule, 1.3 million more Americans will be eligible for overtime pay starting in January 2020. Since employees who were recently considered exempt may now be newly nonexempt, you may have to make changes to your employees’ classification and payroll. Here’s how the new DOL overtime laws will impact your payroll.

New Salary Threshold

Starting January 1, 2020, the Fair Labor Standards Act (FLSA) salary threshold increases. This is the minimum salary you must pay employees for them to be exempt from overtime wages. The new salary threshold is $35,568 annually or $684 weekly to qualify as an exempt employee. The employee also needs to be paid on a salary basis and have executive, administrative, or professional job duties.

Highly Compensated Employees

The FLSA salary threshold also changes the annual compensation requirement for highly compensated employees to $107,432 a year. You can use nondiscretionary bonus compensation and incentive payments, such as commissions, to pay as much as 10% of the new exempt salary threshold. Up to $3,556.80 in qualifying supplemental income can go toward the threshold.

Impact on Your Business

Although the new DOL overtime laws don’t affect your nonexempt employees, they may affect your exempt employees. If you need to reclassify currently exempt employees, you must find ways to comply with the new laws. For instance, look at your exempt employees’ salaries. If they earn below $35,568, you can increase salaries, pay overtime wages, or limit overtime hours. Keep in mind that if you decide to give raises, you also should give them to nonexempt employees to close the wage gap in your business and avoid wage violations. Also, if you choose to pay overtime wages, you might want to convert employee salaries into an hourly rate to make overtime pay calculations easier.

Talking with Newly Nonexempt Employees

Share as much information as possible about the new DOL overtime laws with newly nonexempt employees. State that the changes are mandatory, and you’re required by law to make them. Show that nobody is losing status or getting demoted. They simply have an opportunity to earn additional income for overtime hours worked. Train your newly exempt employees on how to use your time clock or other timekeeping methods. They need to track the time they work. Share how a newly nonexempt status affects flexibility. There’s less opportunity to create work schedules around personal obligations when staff needs to track the time they spend working and not working. Mention whether you need to reduce certain employees’ tasks to limit the amount of overtime they work. Clarify your overtime policy so employees know whether they can stay late to finish their work.

Let Us Take Over Your Payroll

Let Red River Payroll take over your payroll. Our trained experts stay current on DOL overtime laws and other regulatory changes to ensure complete accuracy and compliance when paying employees. Get in touch with us today.

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