Explaining Overtime Rule Changes: What You Need to Know

4 of April, 2023

Have you been hearing a lot about the new overtime rule changes lately? If you’re an HR manager or business owner, you should be. On March 8, the U.S. Department of Labor released a revised version of the Fair Labor Standards Act’s overtime rules, changing how employers classify and pay employees’ overtime wages.

The policymakers intended this revision to update labor standards for modern workplaces, ensure that employers pay their employees fairly for their time, and guarantee that employers follow the law as written.

But as an employer, it also means understanding these changes and taking action to make sure your business complies with these new rules.

In this article, we’ll get into the nitty-gritty of understanding the new rules related to overtime pay and what it means for your business.

Overview of the 2020 Overtime Rule Changes

With the United States Department of Labor making changes to the overtime rule, it’s important for HR managers and businesses owners to understand how it impacts their operations. The 2020 rule updates the existing overtime laws and clarifies which types of employees qualify for overtime pay.

To break it down, here’s an overview of what you need to know:

• Eligible salaried employees must be paid 1.5 times their regular rate for hours over 40 worked in a workweek.
• The salary threshold for these employees has been increased from $455 per week ($23,660 annually) to $684 per week ($35,568 annually).
• Employees who make more than $100,000 per year are automatically exempt from overtime requirements regardless of job duties.
• Non-exempt employees must be paid time-and-a-half for any hours over 40 in a workweek and any hours worked on a seventh consecutive day in a workweek.

By understanding the new overtime rule updates, you can better prepare your business operations and budget accordingly.

With this knowledge under your belt, you can keep your organization compliant with the 2020 Overtime Rule Changes and protect both your business interests and those of your employees.

Eligibility Requirements Under the New Rules

Let’s take a look at the eligibility requirements of the new overtime rules and how they may apply to your business. First, employees must be paid a salary of at least $684 per week or $35,568 annually in order to be considered exempt from overtime pay under the new rule.

Employers must also consider job duties and requirements when determining if an employee is exempt from overtime pay. This includes looking at the primary duties of an employee, whether or not these duties are independent and are managing a company’s operations.

Additionally, employers must ensure that their employees satisfy certain salary level tests. That is, their salaries must exceed certain thresholds set by the U.S. Department of Labor in order to meet the exemption requirements. This means that businesses must carefully analyze and consider the future wages of their employees in order to remain compliant with these new rules.

Finally, remember that employers can use non-discretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the standard salary level requirement, as long as they make these types of payments on at least a quarterly basis.

Implications of the Overtime Rule Changes on Businesses

If you’re an employer, you’ll definitely want to be aware of the impacts that the recent overtime rule changes may have on your business. At the end of the day, it all boils down to understanding and following the regulations, while still being mindful of your budget.

Here are some key implications of these overtime rule changes that companies should know about:

• Effect on salaries: As a result of the new Office of Management and Budget (OMB) regulations, employers must now pay an overtime rate for hours worked over 40 in a workweek. These new rules may require businesses to adjust salary expectations accordingly to keep up with expected labor costs.
• Potential compliance risks: If businesses do not comply with OMB’s new overtime rules and regulations, they risk facing heavy fines and penalties. Employers must be aware of their obligations under these laws.
• Administrative challenges: To ensure compliance with OMB’s new regulations, employers will need to take steps such as tracking employee hours and updating their payroll systems—which can be time consuming processes.
• Updated HR policies: Companies may need to draft or review existing HR policies on overtime work and get employee acknowledgement by signing such policies in order to maintain compliance with OMB’s new rule changes.

By properly understanding these implications, employers can have a better handle on how to comply with OMB requirements—while still keeping their payroll costs in check. With Sesame’s HR software, staying compliant is easy–so check us out today!

Conclusion

No matter what type of business you run, understanding overtime rule changes is essential for maintaining compliance and managing labor costs. The new overtime rule changes are complex, so it’s important to stay informed and prepared.

With the right understanding of the rule changes and the right HR software in place, you can ensure that your business makes the most of the new regulations, properly compensates your employees, and maintains compliant human resources processes.

When it comes to the new overtime rule changes, the best rule of thumb is to prepare and educate yourself. With Sesame HR Software, you can ensure that your business is in compliance with the new overtime rules and better able to leverage them to support your team and operations.