DOL Overtime Changes Have Impact

USDOL_Seal_circa_2015.svgThe Department of Labor (DOL) released their changes for overtime rules last week.  The changes are significant and will have impact on large organizations and small businesses across the country.

Summary of the changes and what it means for employers:

  1. The salary threshold is changed to $47,476 p.y.  (a big jump from $23,660, the current level).  This means that employees currently classified as exempt and earn less than $47,476 are eligible for overtime at 1 ½ x their hourly pay rate.
  2. The threshold will change every 3 years and it’s automatic.  The next update will be January 1st 2020 and means that employers will need to review their workforce for eligibility again in 2019.
  3. The duties test stays the same.
  4. Incentive compensation (bonuses, etc) can be used to qualify for 10% of the overall threshold.  This means that if you pay bonuses, you can use up to $4,747.60 to meet the threshold for the exempt classification.
  5. The highly compensated employee (HCE) exemption is now $134,004 p.y.  This applies to hourly and salaried employees.
  6. It’s effective December 1, 2016.

 Conclusions:

  • If you have an impacted employee population, you should start looking at it now.
  • It’s a change management project, not just a compensation project.  Communications will play an important role in how the change is received and its impact on workforce productivity.
  • Take a look at including variable pay in your total rewards mix, but evaluate the risks as well.
  • Review job design, roles and responsibilities, and ways of working as part of the impact analysis.
  • Make your compensation plan work for you by drawing a clear line of sight from your business plan to your pay plan with an effective mix of total rewards.

Remember that your compensation strategy needs to support your overall organizational and and business strategy, not the other way around.

Related reading:

SHRM – Impact on pay practices

This article is provided for general information purposes only and is not intended to be human resources consulting advice or specific advice for your business needs.

© 2016 Allium Consulting Group, LLC.  All rights reserved.