Overtime pay eligibility rules are messy. What muddies the waters even further is that as of January 1st, 2020, the U.S. Department of Labor has implemented changes to those rules. If you have salaried employees, some may now be non-exempt. You have decisions to make. With this blog post, I’ll try my best to break down the changes, who they affect, and what you can do to catch up. Have you even thought about your timesheet?

Key highlights of the U.S. Department of Labor’s overtime changes are:

  • Employees who make less than $35,308 per year ($679 per week) are now considered non-exempt and must be paid overtime if they work more than 40 hours per week. The previous threshold, set in 2004, was $23,660 per year ($455 per week).
  • The total annual compensation requirement for “highly compensated employees” (HCE) increases from $100,000 to $147,414 per year.
  • Employers are allowed to use nondiscretionary bonuses and incentive payments (including commissions) up to 10% of the annual salary standard.
  • There is a new commitment to a periodic review and update to the salary threshold.

Who do these changes in overtime rules affect?

First, we need to establish what exempt and non-exempt salaried employees mean. Exempt employees are not eligible for overtime pay. Non-exempt employees are, therefore, eligible for overtime pay for time worked above 40 hours per week.

These new changes will affect over 1.3 million salaried American workers. While the salary threshold has changed, new rule changes don’t affect job duty exemptions, such as:

  • Police Officers
  • Fire Fighters
  • Paramedics
  • Nurses
  • Laborers including non-management production-line employees
  • Non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, ironworkers, craftsmen, operating engineers, longshoremen, and other construction workers

What can you do to catch up on overtime pay eligibility?

Get brushed up on the overtime laws

Now would be a great time to get yourself up to speed on the overtime changes as well as overtime laws in general. The U.S. Department of Labor’s overtime website is a great resource. 

Check your list of salaried employees

Take action and check your list of salaried employees and see who is not-exempt for overtime. Once you have established who is non-exempt, you have options. 

  • You could increase non-exempt employee’s salaries above the $35,308 threshold to make them exempt from overtime pay,
  • You could change the employee’s job duties to make them exempt,
  • Or you could pay the employee overtime pay if they work more than 40 hours of work per week.

Educate employees

Transparency is king! Reduce confusion or possible frustration by explaining all possible changes to newly non-exempt or exempt employees. Let them know what course of action you have taken and why. Being open and honest will go a long way in maintaining good company morale. 

Create or update existing timekeeping systems

So, you’ve decided the best way for your company is to pay overtime rates to non-exempt employees. Great! 

Now tracking hours worked per week will be crucial. 

If you already have a timesheet system in place, that’s awesome! If not, now might be the time to consider shopping for one. You may also want to consider how much your existing system will hold up to any extra usage, especially if you are still using Excel or Google Sheets to track your time.

Don’t forget. Some extra training may be required for non-exempt employees to use a timesheet to track their hours. This extra step in their day may disrupt their workflow and create anxiety, so be a little understanding if you’re met with some resistance.

It’s best to lead with why a timesheet is needed, even if they are a salaried employee. Ultimately, it will lead to their benefit when they work overtime hours.

As the economy fluctuates, so too do the laws that surround it. It’s essential to stay on top of these changes as best you can and get caught up if you fall a little behind. 

However, it’s never easy to get caught up. 

The most important thing to remember when workplace change gets messy is to communicate with those whose work you depend on. Change is always hard at first, messy in the middle, but amazing in the end. 

Everyone wants to be treated fairly. Lead with why right from the start, and you can’t go wrong.

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About the Author

For 30 years, Dovico has been providing time tracking and timesheet software for clients worldwide. Manage your projects and teams, capture time and generate reports.

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