It’s official. On Thursday 3/14, President Obama signed an Executive Order that will significantly change the payroll requirements of salaried employees as it relates to overtime.
Currently, many businesses aren’t required to pay overtime to certain salaried workers if they earn more than $455 a week. This level was set in 2004 and comes to roughly $24,000 a year. It appears that the Obama administration is looking at raising that amount to between $600 and $1000 per week, or approximately up to $50,000 a year.
It is expected that this rule change will affect between five and ten million employees depending on what salary level officials settle on.
Just because a person is paid a salary does not exempt them from overtime pay. Generally, under FLSA, an employer can classify an employee as salaried – exempt from overtime – if that employee spends over 50% of their work time in a management position with management responsibilities (and gets paid more than $455/week).
The rule change will apply to salaried workers as according to the current FLSA, almost all employees paid by the hour (except for some who are paid more than $29/hr) already must be paid overtime wages if they work more than 40 hours per week. The Executive Order would amend the Fair Labor Standards Act and would require employers to also pay time and a half to more of those salaried workers who work in excess of 40 hours per week.
Despite the Executive Order, the change will still require the Labor Department to solicit comments on the new threshold before final implementation. It is expected that the comments received during that period will determine the final pay threshold affected by this new Order. This review is expected to take up to 3 months and enforcement of the order may not go into effect until January 2015.
Earlier this year, Mr. Obama, through Executive Order, raised the minimum wage for certain federal contractors to $10.10 an hour. The current federal minimum wage is $7.25.
When the Order goes into effect, the Advi$or notes that accurately tracking hourly and salaried employees time at work will be even more important for controlling your labor costs and complying with this new regulation. Utilization of automated time and attendance and work scheduling will give you the control you need.
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