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Overtime- Federal Rules and Exemptions

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Over the last few years, there have been many changes to overtime rules and exemptions. As a business, it’s essential your company stays compliant and informed on when the rules change. 

First, you’ll need to figure if your employees are exempt or non-exempt according to the Fair Labor Standard Act (FLSA). Non-exempt employees are entitled to overtime pay while exempt employees are not. Determining if an employee is exempt or non-exempt depends on how much they are paid, how they are compensated, and what kind of work they do. To be an exempt employee, you must be paid a minimum of $23,600 per year ( $455 per week) and be paid a salary. If you are unsure of whether your employee is exempt or not, complete the salary basis test. 

Changes over the years 

In September of 2019, the U.S. Department of Labor announced a final rule to make 1.3 million American workers newly eligible for overtime pay. According to the U.S. Department of labor, the final rule is:

  • Raising the “standard salary level” from the currently enforced level of $455 per week to $684 per week. 
  • Raising the total annual compensation required for “highly compensated employees” from the currently enforced level of $100,000 per year to 107,432 per year.
  • Allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level, recognizing evolving pay practices. 
  • Revising the specific salary levels for workers in U.S. territories and the motion picture industry. 

Then, in May of 2020, The U.S Department of Labor announced a final rule that allows employers to pay bonuses or other incentive-based pay to salaried, non-exempt employees whose hours vary from week to week. The final rule clarifies that payments and the fixed salary are compatible with the fluctuating workweek methods under the fair labor standards act. 

As a business, you should evaluate your employee’s pay to ensure you are in compliance. While these rules can change rather frequently, it’s best to check them often. The Department Of Labor website has many resources for you to understand the overtime rules as they change. 

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