Discover how to calculate overtime pay accurately and fairly. Learn legal aspects, common errors, and special considerations in overtime calculations.
New Overtime Rule Compliance Strategies
If you have exempt employees making less than $35,568, you'll need to implement 1 of these 4 overtime compliance strategies for each affected employee.
It’s after January 1, 2020; do you have any “exempt” employees making less than $35,568 per year?
If so, you’ll need to comply with the new overtime rule by following any of the strategies listed below for each impacted employee.
Overtime Compliance Strategy #1:
Keep existing pay amount, track hours and pay overtime
There is no requirement to give your employees a pay raise. Employees can maintain their current pay amount and simply be dropped to nonexempt status.
This is a great option for employees who typically work 40 hours or less in a typical workweek, with rare instances of overtime actually worked. It’s also a great option for employees who are well below the $684/week amount, even if they occasionally work overtime.
If this is the option you choose, you will need to have applicable employees track all time worked as of January 1, 2020, and pay time-and-a-half for any overtime worked.
Overtime Compliance Strategy #2:
Reduce current salary amount, track hours, and pay overtime
Look at your exempt employees with salaries between $23,660 (the former overtime minimum) and $35,568 per year. If these employees regularly work more than 40 hours a week, employers have the option of dropping them to nonexempt status and reducing their current salary rate to a lower hourly rate that equates to a comparable final wage with their calculated overtime.
If you choose this option, be aware that you may face a drop in morale and will need to clearly explain the move to all impacted employees. You will also need to have affected employees track all time worked as of January 1, 2020, and pay time-and-a-half for any overtime worked.
Overtime Compliance Strategy #3:
Raise salary to more than $35,568
Assuming employees meet the exemption duties test to satisfy the executive, administrative, or professional FLSA exemption standard, employers may increase salaries to at least $$35,568 to maintain exemption status. This will help you avoid the task of having to track hours and pay overtime.
This is a great option for employees whose salaries are close to the new salary level and regularly work more than 40 hours in a workweek.
Overtime Compliance Strategy #4:
Evaluate hours and realign staff workload
Employers who are concerned about paying high sums of overtime and/or bumping up wages to meet the new overtime exemption status may need to evaluate their employees’ workloads. The solution may be to redistribute workloads where certain employees work more than 40 hours in a typical week, or perhaps hiring additional workers to help alleviate any burdens.
As with any new change in law, our experts are here to assist and advise you with your HR questions. Please contact your certified HR expert for assistance with your compliance strategy. Not a current Stratus HR client? Book a free consultation and our team will contact you shortly.
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