What is with the New Overtime Rules?

By: Melonie Geddes

Television shows have often romanticized long days and late nights spent finalizing an advertising pitch or preparing legal briefs for the big court case, and the spark of an idea fueled by lack of sleep and a hundred cups of java, that won over the client and landed the big deal.  But in reality, employees are not too keen on and shouldn’t be expected to work long days and late nights unless they are being properly compensated. For this reason, the US Department of Labor hopes to curb this culture of ‘overworked and underpaid’ by updating overtime pay rules that have not seen significant change since 1938.

The new guidelines raise the threshold for employees eligible for overtime pay from $23,660 to $47,476, which will affect approximately 55 million employees mostly in the small business and non-profit sectors. Although the jump in the annual figure of over $20,000 more a year is significant, this change is meant to protect salaried employees who are working so many hours that they end up making less than the standard minimum wage. By comparison, in 1975 60% of US workers qualified for overtime pay. However today, that number is only 7%. Confounding this problem is the fact that work has become an always-on activity for many who have access to emails and company databases through their phones or tablets, which people say are never more than 5 feet away from them. Employees are given laptops, and are provided more remote and flexible work options almost guaranteeing a 24/7 work mentality for some. Which, in such instances, it is important for employers to create an environment that doesn’t make employee feel like they need to be “on” 24/7 particularly in non-exempt roles.

The change, in a nutshell, ensures that, by December 1, 2016, anyone making less than $47,476, either salaried or hourly, who works more than 40 hours per week is eligible for overtime pay. However, the “duties test” still applies, so anyone making over $47,476 may also qualify for overtime pay if the job duties are not those of an exempt category as defined by the DOL. For continued employee protection, the change also includes a provision where the threshold will be updated every three years so that it remains at the 40th percentile of full-time salaries in the lowest-wage region.

These changes to the overtime rules will have a significant impact on both employers and employees. Small businesses will need to prepare well in advance of December 1, 2016 deadline in order to be properly prepared for these changes and manage communication to the employees that are impacted.

Your Employers Advantage representative can provide an in depth explanation regarding how the new guidelines affect your organization specifically.  how to enact them within your organization,  and assist you with the policy rollout and management training related to those changes.