Staying in Compliance with Overtime Pay Regulations
As you know, the Department of Labor announced new regulations in May regarding overtime pay for full time employees.
Tammy McCutchen, the DOL’s former Wage and Hour Division administrator, spoke recently at a conference to address employers’ issues with implementation of the final rule. She had some advice for employers trying to comply with these guidelines.
Use the weekly benchmark of $913 instead of the annual salary to determine whether or not employees are eligible for overtime pay. The regulations measure an employee’s pay on a week-by-week basis, so McCutchen says focusing on the $47,476 annual threshold is the wrong approach. If, for any of the 52 weeks of the year, the employee makes less than $913 during a 40-hour workweek, that person would become eligible for overtime pay.
Don’t round the salary down for highly compensated employees. McCutchen says she’s heard of employers omitting the extra $4 and making it an even $134,000, but she warns that the threshold for highly compensated employees is $134,004 and they won’t qualify if the employer rounds that figure down.
McCutchen advises caution when using bonuses to fill gaps to meet the $913 weekly threshold. They can be counted for 10% of the weekly threshold, and you can adjust this figure to $821.70 if you are adding in bonuses. Is a bonus awarded as an incentive for workers to meet productivity, attendance, or other performance-based targets? If an employee fails to earn the bonus, or the company makes a calculation or payroll error that results in an employee making less than $913 in any week within a quarter, the employee must be classified as OT-eligible for that entire quarter. This is a very sticky issue, one that is best clarified by an experienced CPA.
These salary thresholds aren’t official until December 1, 2016, so you still have a few months to plan. McCutchen suggests making any salary changes over the week of Thanksgiving, because of the way the calendar falls. She believes it will be easier than doing so mid-week. In 2020, the salary threshold will increase, and employers will be given 150 days’ notice before that happens. As December 1 approaches, be mindful of your state’s regulations with regard to changes in pay – some states require that you notify workers two weeks or more in advance.
As always, our CPAs look forward to speaking with you about this, or any other questions you have about running your business.
The full article can be found here.