How New Department of Labor Rules on Pay Affect Workplace

By: Daniel Steingold | June 06, 2016

The Department of Labor’s recently released new rules regarding overtime pay, which will extend overtime to over 4 million new workers in the coming months, must be complied with by December 1st.

The basic change that the Obama administration’s new law will impose is a doubling of the minimum salary threshold that can be used to consider an employee exempt from getting overtime.

For employers, this law essentially provides three ways to comply. One way to comply is by raising the salaries of non-exempt employees, so that employees remain exempt from overtime. Another is to reclassify hourly employees as being salaried.

And a final solution is to reclassify salaried employees as being hourly, adjusting an employee’s base pay to allow for overtime. It is believed that this final solution is the most cost-effective for employers, as it should pay employees little to no more than they were paid before.

As a point of emphasis, if you are an employer who plans to switch salaried employees to being hourly, or vice versa, it’s important to not constantly change employees back and forth. This can set the impression that you’re trying to avoid staying compliant with the Fair Labor Standards Act (FLSA).

Healthcare and other benefits can also be impacted by the change in working status, which makes it important to fully consider all the relevant consequences.

The Department of Labor’s new rules also allow for automatic increases every three years starting in 2020, which along with separate campaigns for a higher minimum wage, suggest that future mandated increases in pay are here to stay.

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