The Final Rule

May 19, 2016  |   Posted by :   |   YPHR Blog

Today, President Obama and Labor Secretary Thomas Perez announced the publication of the Department of Labor’s final rule updating the overtime regulation.  The Final Rule focuses on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt.  See below for key Exemptrequirements:

The Final Rule sets the standard salary level at $47, 476 annually ($913/week) for a full-year worker.  This level was determined by figuring the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region in the United Sates – currently the South. While slightly lower than the over $50,000 some anticipated, it is still quite a jump from the previous standard salary level of $23,660 or $455/week.

Additionally, the Final Rule sets the total annual compensation requirement for highly compensated employees subject to a minimal duties test to $134,004 or the annual equivalent of the 90th percentile of full-time salaried workers nationally.

Next, the Final Rule amends the salary basis test, allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

The Final Rule goes into effect on December 1, 2016.  The salary thresholds will be adjusted automatically every three years, with the first adjustment going into effect on January 1, 2020.

Wondering what all this means for you and your business?  Check out our previous post about how to prepare for FLSA changes by clicking here.   You can also contact YPHR’s compensation specialist, Amy Petrus.


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