Department of Labor changes in overtime pay loom

Changes in the U.S. Department of Labor’s overtime rule and pay rate are on the horizon.

The proposed changes include raising the salary level for exemptions for white-collar workers and updating the rate of pay used to calculate overtime for nonexempt workers. Acting Secretary of Labor Patrick Pizzella is expected to finalize the changes by the end of this year or early next year.

Employers need to be aware of the proposed changes so they can be prepared.

Overtime rule

This change in employment law would make over a million more people eligible for overtime pay. The Department of Labor has proposed increasing the minimum salary level for exemptions for white-collar workers from $23,660 to $35,308. The proposed salary threshold is lower than the $47,476 level adopted by President Barack Obama’s administration and subsequently blocked by a federal court.

The rationale for the change is to try to make adjustments for inflation. Some had proposed a threshold of $51,000.

The change would require employers to reclassify some positions from exempt to nonexempt. It could become more difficult for employers to find the skilled candidates they need for the right pay.

This will pose a real challenge for any employer operating on tight margins.

Calculating overtime pay

The Department of Labor also has proposed a change to regular rate of pay under the Fair Labor Standards Acts (FLSA). At issue is whether some perks should be included in the regular rate of pay, which is used to calculate overtime premiums for nonexempt workers.

The FLSA stipulates that nonexempt workers be paid 1 ½ times their regular rate of pay if they work more than 40 hours a week. Overtime pay, however, isn’t just based on an hourly rate. It also might include bonuses, shift differentials or commissions.

The proposed revision in the law would clarify the perks that are excluded from the regular rate of pay. Excluded benefits include tuition reimbursement, employee discounts, wellness programs and reimbursed expenses.

The Society for Human Resource Management (SHRM) supports both proposals.

Workshops start Sept. 18

My first free Lunch and Learn workshop sponsored jointly with Dennis A. McCurdy, CIC, CFP of McCurdy Group, is set for noon Sept. 18 at Dennis’ office at 212 Main St., Sturbridge. The topic will be Benefits and Secondary Insurance Coverage. On Oct. 16, we’ll discuss Employee Assistance Programs.

Please join us and learn about these important Human Resources issues. Register for the workshops at Eventbrite or by emailing me or Dennis’ office.