How the Final Overtime Rule 2.0 Affects Your Business
The U.S. DOL has recently passed a final rule that will change the overtime guidelines starting January 1, 2020. There’s been no major amendment to the national salary threshold since 2004, which makes this revised overtime rule a significant shift for many businesses—and their employees. Here’s an overview of the final Overtime Rule 2.0, and a look at what the key changes could mean for your company.
Changed Exempt Status and Salary Threshold
Before the final Overtime Rule 2.0, the federal law only allowed salaried workers making under $23,000 a year or $455 a week to earn overtime pay. Of course, there were some exceptions to the salary threshold, but the rule generally applied to professionals and blue-collar employees. Under the revised overtime rule, workers making less than $35,568 a year or $684 a week are eligible for overtime pay, or 50% extra pay for every hour worked over 40 hours.
Any salaried employee in your business that falls under the salary threshold will no longer be exempt from overtime pay. Therefore, you’ll have to start factoring time-and-a-half into some of your staff’s payroll or consider implementing raises to maintain exemption and lawful payroll policies.
Updated HCE Annual Compensation
Per the revised overtime rule, the additional total annual compensation for highly compensated employees (HCEs) will increase from $100,000 to $107,432. Typically, the federal government considers the amount of HCEs per company and measures their contributions while assessing the fairness of a 401(k) plan. This could affect 401(k) plans, as the federal government compliance test results may change while HCE statuses update.
Therefore, the federal government may make significant 401(k) amendments to ensure that your company plan treats all employees equally after the revised overtime rule takes effect. If you have certain employees that will no longer fall into the HCE category, you’ll need to understand whether raising salaries or maintaining compensation will have a better outcome for your company.
Payroll Administration for the Final Overtime Rule 2.0
Staying on top of payroll policies leaves no room for mistakes, which can be overwhelming for small- to medium-sized businesses without any dedicated payroll oversight. With overtime rule revisions quickly approaching, some companies need more help than ever. If you want professional assistance navigating the new salary threshold, exemplary status requirements, and other revised overtime rule amendments, partner with Professional Employer Resources (PER).
At PER, we offer payroll administration to help alleviate the challenging tasks associated with W2 tax reporting, year-end W2’s, comprehensive payroll deductions, and more. To learn more about our payroll services and get your company and your payroll prepared for the revised overtime rule, call us today at 888-599-4991.