May 23, 2016

The New Overtime Rules in the U.S.

By Paul Bieber

Many companies treat people as salaried administrative, executive and professional employees. This means these folks don’t get overtime. I’m sure most of the folks designated by this are truly in those positions. But there are some cases where this has been used to avoid paying overtime. I know that no one in our wonderful and patriotic glass industry has ever or will ever do this intentionally, but for the few people who read my blog who are not in glass, here’s the skinny.

Currently, to qualify as one of the exempted folks in these categories, an employee has to earn $23,660 per year, or more. The new floor is $47,476 per year, effective December 1, 2016. A few pro-business groups have said they will fight this regulation as anti-business. I don’t think they will succeed and that the rule will go into effect as the last change in this earnings level was in 2004.

What does this mean to you? Look at your payroll and see if you have people in these areas that are on salary rather than hourly. The new floor is equivalent to $22.83 an hour. If you have people making $35,000 per year and you say they are in not eligible for O/T, you have to change something: Either convert them to hourly pay, or give a raise to the new floor. Here is the tricky part; you have to do the math and decide which way to go. Look at the hours these exempt folks work. Do they work from home in the evening? Do they come in on weekends? These are paid hours if you go the hourly route.

So this will impact your budgets fairly quickly. Here’s your plan:

  • Review current salaries for your exempt employees. Anyone over $47,476, don’t worry about.
  • Can you raise a few of them to the new floor? How much will this cost? Do the opposite and figure the cost if you changed them to hourly and they did earn O/T.
  • Also, you have to decide if you are going to lower an employee’s hourly rate if you convert them from salary to hourly and explain, with their O/T, they will make the same. Basically a bad morale way to go, but your budget may require this.
  • If you pay someone with a quarterly bonus then that bonus amount can count toward 10 percent of their compensation for these standards. You may be better off placing this money in payroll than in bonus.
  • You can consider hiring part-time employees to do some of this work. Might be a good financial idea, but generally bad for morale and actual productivity. The time you spend training each new part-timer eats up the costs you would have paid under the new rules.
  • If you place someone on hourly, be sure to look at their hours. If they check email at night, or come in on a Saturday, you’ll be paying O/T on this.

Again, these rules go into effect on December 1, 2016. There may be changes before then. Keep reading my blog for any updates.

Seattle, here I come. I am looking forward to meeting old friends and making new ones at the Glass Expo next week. If you would like to meet me for a complimentary half-hour consultation, drop me an email at or call me at 631-456-2397. See you there!