Best Practices in Employee Time and Attendance


July 2016

Overtime Rules Are Changing

overtime threshold increase

DOL Doubles Overtime Salary Threshold

Over 4 million more U.S. workers are expected to qualify for overtime

This spring, the Department of Labor announced it would increase the overtime salary thresholds for both employees and highly compensated employees starting December 1, 2016.

Specifically, the final rule more than doubles the current standard minimum salary threshold employees need to earn overtime. DOL expects the changes to make an additional 4 million U.S. workers eligible for overtime and impact 11 million employees total.

Standard Employee Threshold Annually $23,660
Weekly $455
Highly-Compensated Employee Threshold Annually $100,000

Effective Dec. 1, 2016
Standard Employee Threshold Annually $47,476
Weekly $913
Highly-Compensated Employee Threshold Annually $134,004

Current salary threshold versus changes effective December 2016

So, why did DOL pick these numbers? Specifically, the final rule:

  • Raises standard employee threshold to 40th percentile. DOL's new salary threshold, $47,476, corresponds with the 40th percentile of full-time salary workers in the nation's lowest-earning region (currently the South).
  • Raises HCE salary to 90th percentile. The $134,004 threshold for highly compensated employees (subject to a duties test) corresponds with the 90th percentile of full-time workers nationally.
  • Adjusts every three years. Unlike past overtime regulations, the new salary thresholds will adjust every three years to keep pace with inflation, beginning January 1, 2020.

Read the full article here:

overtime is ok

3 Steps to Assess when Overtime Is Okay

Make more strategic overtime decisions with this three-step process

Starting December 1, 2016, the overtime minimum salary threshold for workers will more than double. This means 4 million more employees will qualify for overtime, forcing employers to make an important decision now:

How should employers approach overtime?

Many employers mistakenly assume overtime is something that should always be avoided. In fact, overtime can be a useful cost-saving strategy when managed strategically. The critical step is determining the impact of overtime on your organization. To do so, start with these three steps:

  1. Determine how many employees will qualify for overtime under the new rules.
  2. Assess how many overtime hours employees currently work. Which category do they fall into?
    • Occasional Overtime. If overtime doesn't strain your labor budget, it could be most effective to continue to pay it.
    • Expected Overtime. Do employees expect or rely on overtime as part of their regular compensation? Consider setting an overtime budget, letting employees manage when and how they use it.
    • Heavy Overtime. If overtime costs are a burden, consider raising salaries to meet or exceed the minimum threshold to avoid overtime pay. (Note that for employees to be exempt, they also must meet the job duties criteria as well.)
  3. Consider combining these strategies as needed by department, team or group to create the most cost-effective overtime management plan.

If paying overtime is a cost-effective strategy for your organization, it's important to note that overtime sometimes comes with a stigma (especially with professional or salaried employees).

To learn more about overcoming it, download the free white paper, Overtime Is Okay: 5 Ways to Overcome the Time-Tracking Stigma, from Attendance on Demand.


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In the News

Timely news in HR and payroll from around the web

House Democrats propose bill to phase in overtime changes
Source: The Hill

Employers consider employee reclassification options before new overtime rules take effect
Source: Minneapolis Star Tribune

New overtime rules could affect 401(k) plans of executive, administrative and professional workers