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The Good News About The New Overtime Rule

Manager work overtime and sleep on laptop

The Good News About The New Overtime Rule

Posted by Payroll Data Processing in Blog May 31 2016

The DOL has released a new rule regarding overtime. And yes, it will cause extra headaches for businesses and the managers and HR professionals responsible for keeping them afloat. But when you consider the original proposal, the final rule we’ve got now actually has some good news. Of course, no one should be getting excited about the new rule, but HR professionals and managers who have been fearing the worst after hearing the proposed rule can breathe a sigh of relief, even if it’s just a small one. So here’s some good news hidden within the DOL’s new overtime rule.

The first bit of good news for managers and HR professionals is that the salary threshold has been lowered. According to the proposed rule, the annual salary an employee had to earn in order to be exempted under the FLSA was supposed to be $970 a week, or $50,440 a year. But the official rule now states that the salary threshold is $913 a week, or $47,476 a year. Additionally, outside sales employees are still considered exempt from the salary requirements.

HR professionals and managers will be happy to know that this threshold won’t be increasing every year. The DOL’s original proposal suggested linking the salary threshold to an automatic rising system, which means that the threshold would increase every year. But the new rule states that the threshold will increase only every three years.

Nondiscretionary bonuses will also count toward the threshold. This is good news for managers and HR professionals because up until now, only highly compensated employees had nondiscretionary bonuses count toward their salary. Now, HR professionals and managers can add nondiscretionary bonuses to an employee’s salary to help push them across the exemption threshold. The final version of the DOL overtime rule states that employers can use nondiscretionary bonuses and incentives such as commission to satisfy as much as 10% of the new $47,476 a year threshold.

HR professionals and managers have feared that the duties test for the professional exemptions would change with the new DOL overtime rule. In early versions of the proposed rule, the DOL was interested in requiring employees to spend over 50% of their time performing exempt duties in order to be considered exempt. Thankfully, the DOL decided not to make any changes to the duties test.

And one last but great hidden gem for managers and HR professionals in the new overtime rule is more compliance time. The DOL had been hinting for some time that employers would only have 60 days from the time the final version of the rule came out to be in compliance. But the good news here is that the final rule allows employers until December 1st, 2016 to get all their ducks in a row.

No, the new overtime rule is certainly not a blessing for HR professionals and managers. But there is a silver lining and some positive aspects to appreciate that will help with the adjustment.