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Donald Trump was elected 45th president of the United States, and the Republicans retained control over the House and the Senate. As a result the GOP has effective control of tax policy, meaning there may be some major changes going forward. So what can you expect?
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The new changes for overtime will not come into effect December 1. The government has issued a stay order and suspended the new rules from coming into effect on December 1, 2016.
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Exempt from Overtime Pay? Maybe Not...
Employers and employees need to know about these changes to overtime rules.
Under the Fair Labor Standards Act (FLSA), which originally introduced the concepts of a 40 hour work week, a minimum wage, and "time-and-a-half" overtime pay, the Department of Labor is changing the rules for overtime exemptions. The new standards are outlined in the "Final Rule on Defining and Delimiting the Exemptions for Executive, Administrative, and Professional Employees." The Final Rule updates the salary and compensation levels needed to exempt certain workers from overtime pay. The new rules are effective December 1, 2016.
The only requirement affected by the Final Rule is the salary level test. Any employee earning more than $913 per week (or $47,476 per year) will be exempt from overtime pay, provided they also pass both the salary basis and duties tests. The amount is currently $455 per week (or $23,660 per year.) Up to 10% of this standard salary level can include nondiscretionary bonuses and incentive payments such as commissions.
Highly Compensated Employees (HCE), subject to a more minimal duties test, are also ineligible for overtime. The Final Rule raises their total annual compensation level from $100,000 to $134,004. More information about rules for HCEs can be found here.
The other major change is that this wage threshold will be automatically adjusted every three years, beginning on January 1, 2020. The new salary level is based on Census data compiled from the 40th percentile of earnings of full-time salaried workers. Rate adjustments will be calculated based on future Census data using the same formula.
Employers may want to evaluate their payroll data and the needs of their business to decide if they should make any changes with compliance to the Final Rule. The following are general options and are not intended to be specific suggestions.
Some exceptions to the Final Rule may occur for certain non-profit employers, as well as state and local governments.
While the rules may differ slightly, the increased salary thresholds are the same as for all workers.
At Diel & Forguson LLC, it is our job to make sure that you have the knowledge you need to comply with the ever-changing rules and laws affecting you and your business. We are here to answer questions and offer advice about your specific situation.