Understanding the New Overtime Regulations

Earlier this week, the Obama administration and the Department of Labor announced new regulations that will increase the salary threshold for overtime pay. Effectively, when the new regulations take effect in December, millions of workers will be entitled to time-and-a-half pay when they work more than 40 hours in a week.

Who qualifies

These new regulations will mainly affect salaried workers, as hourly workers are generally already guaranteed overtime pay regardless of their earnings level. Eligibility for salaried workers is based on two factors – how much they earn and the nature of their work.

Since 2004, to qualify for overtime pay, salaried workers had to earn less than $23,660 a year. These updated regulations increase that threshold to include salaried workers earning less than $47,476 a year.

Workers earning above the salary threshold are also subject to a duties test to determine whether they are eligible for overtime. There are a number of exemptions from federal overtime regulations, including for workers classified as executives, administrative employees and professionals.

How employers can comply

The Department of Labor suggests four main ways to make sure they comply with the new regulations:

1. Raise these workers’ salaries to above the new threshold.
2. Pay the mandated time-and-a-half overtime for those workers who put in more than 40 hours a week.
3. Make sure workers don’t work overtime.
4. Some combination of the above.

These new regulations will likely meet some resistance from the business community. But it’s important to remember that the goal of these overtime regulations is to promote a healthy work-life balance – which is essential to a happy and productive workforce.