Paying overtime is a legal obligation for those that qualify, which is typically non-exempt employees. If employees are non-exempt, it means they are entitled to minimum wage and overtime pay when they work more than 40 hours per week. Whereas, employers are not required to pay overtime to employees who are properly classified as exempt. They may, however, choose to compensate such individuals for extra hours worked through benefits packages. However, the Labor Department has issued its proposal to raise the salary threshold for exempt employees – a change that could make more of your employees eligible for overtime premiums.
The DOL announced on August 30, 2023 that it intends to significantly raise the exempt salary threshold from $684 per week to $1,059, meaning employees would need to earn $55,068 or more per year to be exempt from OT pay. It's possible that 3.6 million U.S. workers would become eligible for overtime pay under the proposed rule and it's expected for the DOL to prioritize this rule and move swiftly through the notice and comment period.
Start preparing for what could be big changes to your compensation plans. DOL’s proposal also would increase the total annual compensation requirement for highly compensated employees to $143,988 per year. The proposal outlines an automatic update provision for future overtime thresholds beyond what is included in the proposed rule and would not make changes to the FLSA’s “duties test” for determining overtime eligibility. Once published in the Federal Register, the proposal will be subject to a 60-day public comment period.
We are keeping a close eye on this ruling as it could drastically change payroll for every single one of our clients. We are prepared with draft policy, employee communication plans, board approval plans, FAQs, and change plans for if/when this proposal needs to be implemented. If you have any questions about this proposal or would like some help with these potential revisions to your payroll and documents, please feel free to reach out - hello@retainhr.com
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