In September of 2019, the United States Labor Department ruled on new terms regarding overtime pay and how it relates to salaried employees. These are changes to be enacted after the adjustments in 2016 were rejected and to add higher rates than previously outlined.
It’s important to stay up-to-date on employment laws to make sure you are respecting the rights of your employees, that’s why we’re providing a breakdown of what’s new starting January 2020.
What is the new law on overtime?
There are three key things to note with the new law for construction or field service companies; the “standard salary level,” annual compensation rate, and incentives. The other change to the overtime law is revolved around the motion picture industry and not relevant to construction or field service.
Standard Salary Level
The previous standard salary level sits at $455 per week and, as of January 2020, will be raised to $684 per week. This translates to a salary standard of $35,568 per year, meaning you may need to reevaluate your salary agreements with any salaried employees.
Alternatively, you could look into changing them to an hourly rate but you may face some backlash with that decision. It’s best to open up a conversation and never forget to include your human resources department in these decisions.
Annual Compensation Rate
Currently, “highly compensated employees” or HCEs have an annual compensation requirement of $100,000. Under the new law, HCEs are required an annual compensation rate of at least $107,432. This means that any employees you have that meet the HCE criteria need to be compensated at least $107,432 annually starting in 2020. Most of your crew won’t meet these criteria, but it is important to familiarize yourself with it in case you don’t realize you have an HCE or two.
Incentives and Bonuses
If you currently offer and bonuses or incentives to your employees you will be able to use those toward a salary. “Nondiscretionary bonuses and incentive payments,” that are paid annually may satisfy up to 10% of the salary level. Again, this may not affect all of your crew, but it’s worth knowing in case of any bonuses and incentives.
Does an employer have to pay overtime?
Per the U.S. Department of Labor employees, “must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.” This means that employers are required to provide an overtime payment unless an agreement exhumes the employee from overtime pay.
Who is exempt from overtime pay?
Exempt employees are typically considered Highly Compensated Employees. These are the HCEs that are receiving new regulations and changes to their pay. These are almost exclusively salaried positions and do not rely on hourly rates. Most of the new overtime laws impact these exempt employees.
These new overtime laws go into effect on January 1, 2020. To prepare you may want to evaluate your budget and meet with the employees needing changes. You also may want to look into time tracking for all of your employees to make sure you know when they’re working overtime!