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Plenty of Options with New Overtime Rule

posted May 25, 2016, 2:44 PM by Resty Manapat

The Labor Department’s overtime rule simplifies and modernizes the nation’s overtime regulation − to ensure that extra work means extra pay. There is a misperception out there that there is only one way for employers to comply with our new our new overtime rule when they have white-collar employees who earn less than $47,476 per year: change them from salaried to hourly employees. That is just not true.

First, employers have a wide range of options for responding to the changes to the salary level. Employers can choose the one that works best for them. Options include:

Raise salary and keep the employee exempt from overtime: Employers may choose to raise the salaries of employees to at or above the salary level to maintain their exempt status, if those employees meet the duties test (that is, the duties are truly those of an executive, administrative or professional employee). This option works for employees who have salaries close to the new salary level and regularly work overtime.

Pay overtime in addition to the employee’s current salary when necessary: Employers also can continue to pay their newly overtime-eligible employees the same salary, and pay them overtime whenever they work more than 40 hours in a week. This approach works for employees who work 40 hours or fewer in a typical workweek, but have occasional spikes that require overtime for which employers can plan and budget the extra pay during those periods. Remember that there is no requirement to convert employees from salaried to hourly in order to calculate their overtime pay!

Evaluate and realign hours and staff workload: Employers can ensure that workload distribution, time and staffing levels are all managed appropriately for their white-collar workers who earn below the salary threshold. For example, employers may hire additional workers.

Second, based on feedback we heard from the employer community, the overtime rule broadens the definition of salary basis to allow nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary test requirement.

Third, as we’ve said before: Nothing in the Fair Labor Standards Act – or in the overtime rule – requires the choice between flexible work arrangements or opportunities for career advancement and complying with basic labor standards. There is no requirement that a worker must have a predetermined schedule, and nothing prohibits working whenever, wherever or however the worker and the employer agree.

Finally, although the FLSA requires that employers keep certain records to ensure that workers get paid the wages they earn and are owed, it’s up to the employer to choose the method that works best for them and the needs of their workforce. There’s no requirement that employees “punch in” and “punch out.” Employers have flexibility in designing systems to make sure appropriate records are kept to track the number of hours worked each day.

The overtime rule renews an important promise of the Fair Labor Standards Act for millions of white-collar workers: A long day’s work should lead to a fair day’s pay.


Source: United States Department of Labor