If you have employees who earn less than $23,660 a year, then you are currently paying time-and-a-half when those employees work more than 40 hours per week. On May 18, 2016, the Department of Labor issued its final rule on overtime pay, increasing the overtime threshold to $47,476 a year effective December 1, 2016. As a result, millions of employees may be eligible for overtime pay.

Overtime Rule Impact on Employers

How does this affect you as an employer? That depends. There are several options you will need to evaluate to determine what works best for your organization.

  1. If you have employees who earn between $23,660 and $47,476 per year, and have some managerial duties, then they are currently exempt from overtime. Under the new rule, effective December 1, these employees will be eligible for time-and-a-half if they work more than 40 hours per week.
  2. You may have some employees who currently make $46,000 or $47,000 per year. It may be beneficial to increase the base pay of these individuals to $47,476 to avoid the need to pay overtime if these individuals typically work over 40 hours per week.
  3. You can reduce hours for employees in the $23,660 to $47,476 range so they are only working 40 hours per week.
  4. You may need to address benefits to help offset some of the increase in over-time pay.

Looking ahead, the Department of Labor has set updates to take place every three years with the overtime threshold expected to rise to more than $51,000 on January 1, 2020.