The U.S. Department of Labor has announced its long-awaited Final Overtime Rule making changes to federal overtime regulations governing which employees are entitled to minimum wage and overtime pay under the ‘white-collar’ exemptions.

Effective as of Jan. 1, 2020, the Final Overtime Rule will increase the standard salary level by almost 50% from $455 to $684 a week, or equivalent to $35,568 a year. This translates to a salary threshold of $1,368 for employees paid on a biweekly basis, $1,482 on a semimonthly basis and $2,964 on a monthly basis. It’s important to note that some employees may be eligible for overtime above this salary level based on their job duties.

The new regulation also raises the total annual compensation level for exemption from minimum wage and overtime requirements for ‘highly compensated employees’ from $100,000 to $107,432 per year. There is an option that allows employers to use non-discretionary bonuses and incentive payments paid annually to satisfy up to 10% of the standard salary in a 52-week period. It also revises the special salary level for workers in U.S. territories and in the motion picture industry.

Changes to the job duties test and provisions to automatically adjust the salary threshold was not included in the final rule.

What to Do Now?

DM Payroll Services recommends you begin identifying those employees that are affected by the new rule. Our system allows for you to easily run a report to identify those salaried, exempt-status employees currently paid less than $684 per week. Then confirm if these employees meet the applicable duties test and adjust their salary or bonus compensation accordingly by Jan. 1. It is important to note that DM Payroll Services does not make any changes to your employees’ payroll without your instructions to do so. To learn more about our payroll processing services, contact us today.