The Department of Labor is planning to update regulations surrounding who is eligible for overtime pay. This change may affect your business, so it’s essential to understand how the new rule may apply to your employees.
Are you ready for the changes? Here’s what you need to know.
Who is eligible for overtime pay?
The Fair Labor Standards Act’s (FLSA) current rule became effective on January 1, 2020. It stated that full-time employees earning less than $35,568 a year are entitled to time-and-a-half pay for any hours over 40 worked in a week. There are some exemptions from this rule.
To be exempt from this rule, the employee needs to meet both a salary and duties test. The employee must receive an annual salary of at least $684 a week ($35,568 per year). Additionally, their duties must fall under one of the following categories:
- Executive
- Administrative
- Professional
- Computer professional
- Outside sales
Each one of these job classifications has its own unique duties.
The Department of Labor(DOL) periodically reviews the guidelines and thresholds to ensure they are relevant to income levels. In June 2021, they announced the current threshold was under review and found to be too low.
The DOL is currently holding listening sessions and gathering feedback from employees and employers regarding the current thresholds and the potential impacts of making changes.
What does this mean for business owners?
Raising the overtime threshold will have a financial impact. In fact, the 2020 ruling affected 1.3 million workers. Now is the time to review employees’ current salaries and job duties. Failure to apply to FLSA rulings could land you and your business in trouble.