NEW OVERTIME RULE
The Department of Labor (DOL) released historic legislation today that will drastically increase the number of employees who are eligible for overtime pay.
Effective December 1, the salary threshold under which employees are automatically non-exempt will increase from $23,660 to $47,476.
Every employee who earns less than $47,476 will become eligible for overtime pay, which is 1.5 x regular pay for hours worked over 40 in a week.
EXAMPLE:
- Today: Sally is an exempt supervisor with an annual salary of $45,000 ($21.63/hr). If Sally averages 45 hours per week, she still earns $45,000 per year
| Job Type | Hourly Pay | Hours Worked | Annual Pay |
| Exempt | $21.63 | 45/wk | $45,000 |
- Starting December 1, if Sally’s hourly pay stays the same ($21.63) and she continues to work 45 hours per week, she will become an hourly/non-exempt employee earning $53,436 per year ($45,000 in regular pay plus $8,436 in overtime pay)
POSSIBLE EMPLOYER STRATEGIES & EXAMPLES
- Keep employees’ hourly pay and hours worked the same. Affected employees become non-exempt and eligible for overtime pay
| Job Type | Hourly Pay | Hours Worked | Annual Pay |
| Non-Exempt | $21.63 | 45/wk | $53,436 |
- Increase applicable employees’ salaries to $47,476. The employee will earn more but continue to be classified as salaried/exempt
| Job Type | Hourly Pay | Hours Worked | Annual Pay |
| Exempt | $22.83 | 45/wk | $47,476 |
- Keep employees’ hourly pay the same (employee is eligible for overtime pay) but cap their hours at 40 per week to avoid paying overtime wages
| Job Type | Hourly Pay | Hours Worked | Annual Pay |
| Non-Exempt | $21.63 | 40/wk | $45,000 |
- Decrease employees’ hourly pay (factor in estimated overtime pay) and allow employees to continue working the same number of hours per week which would correspond to the same annual earnings
| Job Type | Hourly Pay | Hours Worked | Annual Pay |
| Non-Exempt | $18.22 | 45/wk | $45,000 |
Based on a job duties test, employees earning at least $47,476 may qualify to be exempt from overtime pay. Exemptions can include employees classified as executive, administrative, professional, outside sales or computer.
Contact us for support with your company’s compensation strategy and earnings calculations. We’re here to help.
Jason Eisenhut
630.286.7341
jeisenhut@employco.com