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IMA Human Resources Blog

U.S. Department of Labor salary overtime changes

Baker Tilly Virchow Krause, LLP is an IMA Member

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.

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