January 1 brought us into the new year, and with this new year comes new rules. Employers need to be aware of the recent changes to rules regarding overtime pay.
Overtime Rule change
“On September 24, 2019, the U.S. Department of Labor announced a final rule to make 1.3 million American workers eligible for overtime pay,” per the U.S. Department of Labor. As a result, most salaried workers who earn less than $35,500 per year are now eligible for overtime pay under the 2020 rule change. The previous salary level was $23,660 per year.
Employers Must Pay to Comply with the Law
Federal and State laws require employers to pay overtime. According to an article on nolo.com, “The overtime premium is 50% of the employee’s usual hourly wage. This means an employee who works overtime must be paid ‘time and a half’- the employee’s usual hourly wage plus the 50% overtime premium for every overtime hour worked.” Daily and weekly overtime is not permitted. Basically, once an hour is counted as an overtime hour whether for the daily or weekly overtime, it may not be counted towards another form of overtime. The combination of the more employees qualifying for overtime and the 50% rate can really start to add up if employers aren’t careful.
Avoid Paying Unnecessary Overtime
With more employees potentially eligible for overtime, employers must evaluate policies and procedures and review all employees’ classifications to see where they fall. An employer cannot refuse to pay for overtime hours actually worked. Unfortunately, there are some employees who just stay late and do not do anything. Employers need clear policies regarding who is expected to work overtime and under what conditions. Employers must monitor all those working overtime and discipline or terminate employees who violate the company policy.
How does Overtime Affect Your Bottom Line?
This new law went into effect on January 1, 2020. Therefore, employers who haven’t reviewed employee classifications, and those not monitoring overtime hours, might suddenly find themselves with extra expenses.
At Filipek & Company we provide planning, preparation and consulting services for companies that want to stay in business and grow. Let us help you prepare for unexpected costs due to overtime.