New Overtime Pay Rules Finalized for 2020

The U.S. Department of Labor (DOL) has issued the long-anticipated final version of its overtime eligibility rules. The changes will take effect on January 1, 2020. As a result, the DOL estimates that 1.3 million workers will be newly eligible for overtime pay. Are any of them on your payroll? Read on to find out.

What’s Changing?

The basic change that takes effect next year is that employees, even if their jobs can be properly classified as executive, administrative or professional, are still eligible for overtime pay unless they earn at least $684 per week. That’s the equivalent of a $35,568 annual salary. The previous “white-collar” employee threshold, set in 2004, was $455 per week or $23,660 per year.

According to the DOL, the updated amount will “set an appropriate dividing line between nonexempt and potentially exempt employees by screening out from exemption only those employees who, based on their compensation, are unlikely to be bona fide executive, administrative or professional employees.”

In addition, the annual income threshold for overtime pay eligibility for “highly compensated employees” (HCEs) has increased from $100,000 to $107,432. Employees whose jobs don’t come under the executive, administrative or professional classifications must earn at least that amount to lose eligibility for overtime pay.

The new HCE threshold was set at the 80th percentile of weekly earnings of salaried workers nationwide. That’s down from the 90th percentile in the earlier proposed version of the new rule.

How Will Bonuses Factor into the Overtime Equation?

Some earnings that aren’t part of the employee’s regular pay can be added to their base pay when calculating where they are in relationship to the exempt threshold. Specifically, a formula-based extra pay component that’s not discretionary — such as a bonus based on productivity, corporate profits or sales commission — can be added to base pay for overtime pay eligibility calculation purposes.

However, the variable pay component can’t represent more than 10% of that employee’s total pay. Also, it must be given no less often than annually to qualify {Continue Reading}