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Federal rules involving overtime to change

The U.S. Department of Labor (DOL) has finalized new rules under the Fair Labor Standards Act (FLSA) for overtime. The federal agency determined that most workers who fall under the FLSA qualify for overtime when they work over 40 hours per week. This change will increase the number of workers eligible for overtime by an estimated 1.3 million employees here in the U.S.

This is the first change in overtime rules since 2004, and it looked upon as merely an update of the rules to keep them in-step with the current economy and pay practices.

Exceptions to the new rules

There are seemingly always exceptions to a rule, particularly when it comes to government policy. Typical exceptions to overtime rules involve a salary threshold, a salary basis test and a duties test. Changes for 2020 will only affect the salary threshold:

  • The weekly salary threshold goes to $684 per week, which is up from $455 per week.
  • The new limit for highly compensated employees goes to $107,432 annually, which is up from $100,000 annually.
  • Employers now can count 10% non-discretionary bonuses (including commissions) paid annually toward employees’ annual salary.
  • These salary thresholds apply to workers in U.S. territories as well as those working outside the U.S. as part of the domestic motion picture industry.

New rules go into effect January 1

Managers and human resources staff should examine these changes before the end of the year to determine how they will impact their company’s pay structure. Those affected may wish to shift job responsibilities or pay packages to maintain fair pay scales and avoid an increased number of staff eligible for overtime.

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