On September 24, the U.S. Department of Labor announced new rules for overtime pay, extending it to an estimated 1.3 million additional workers. Businesses with employees now eligible for overtime will need to make changes to their accounting and payroll systems to accommodate the new change, which goes into effect on January 1, 2020.

This is the first-time federal overtime law has changed in 15 years. Complying with the new rules may seem confusing and daunting for some businesses. Here’s what the new overtime rules mean and how LBMC Employment Partners can help you prepare.

The New Rule

The Fair Labor Standards Act stipulates that employees must be paid time-and-a-half for any additional hours worked over 40 per week. The primary exception to this rule is known as the white-collar exemption, which excludes employees who work in specific administrative or executive roles and meet a certain income threshold.

For the last 15 years, the threshold was $455 a week or $23,660 a year. The new rule raises that threshold to $684 a week or $35,568 a year. This will make approximately 1.3 million more employees eligible to receive overtime pay.

Maintaining Compliance

To comply with the new rules, employers need to pay all workers who make less than $35,568 a year one-and-a-half times their regular hourly rate for any hours worked in excess of 40 per week. Up to 10 percent of non-discretionary bonuses, commissions, or incentive pay can be used to satisfy the minimum salary requirement.

In announcing the rule change, the Department of Labor also declared their intention to keep regularly updating these income thresholds, meaning businesses will need to keep an eye out for changes in the coming years.

How LBMC Employment Partners Can Help

Payroll and taxes are hard enough for businesses to manage without changes to the law. The HR professionals at LBMC Employment Partners make it a top priority to stay up to date with all state and federal labor law changes to ensure that our customers are always in compliance. From full-service HR outsourcing to standalone services, LBMC EP can make sure your company is ready for 2020.

Contact LBMC Employment Partners today to learn more about what your business needs to know about overtime pay.