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U.S. Department of Labor salary overtime changes

On Sept. 24, 2019 the United States Department of Labor announced that it published a final overtime rule, making the minimum salary for exempt salaried employees $35,568.00. This minimum annual salary includes non-discretionary bonuses, commissions and incentives up to 10% of an employee’s salary level, as long as bonuses are paid annually. This means that the bonuses, commissions and incentives that are paid annually can make up $3,556.80 of the salary.

The FLSA’s exemption threshold for highly-compensated employees is set at $107,432.00. The 10% of bonuses, commission and incentives for highly compensated employees can make up $10,743.20 of their annual salary.

If you have any employees that fall under the new threshold, there are two options:

  1. Switch the employee to hourly/nonexempt: this will require you to track the employee’s hours and pay any overtime worked
  2. Raise the employee salary above the new minimum threshold – $35,568.00 or $107,432.00 for highly-compensated employees

The final overtime rule could affect more than the status of an employee as either exempt or non-exempt. It could also impact your employee benefit plans. For example, an employee benefit plan with criteria for eligibility and contributions based on classification of salary/hourly or exempt/non-exempt may experience a shift in participants. It could also affect non-discrimination testing or top-heavy results. We suggest you review your employee benefit plans to determine whether they will be impacted.

These changes will take effect on Jan. 1, 2020. We recommend looking through your employees’ pay to determine who will be affected well ahead of the new year so you can be ready to make the updates when they become effective. Following is a link to the U.S. Department of Labor’s website that goes over the changes: https://www.dol.gov/newsroom/releases/whd/whd20190924.

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The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

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