On May 18, the U.S. Department of Labor released a much-anticipated final decision regarding revising the nation’s overtime rules—a decision with the potential to impact nearly 4.3 million American employees by doubling the exempt salary threshold level.
But on November 22, a federal judge in Texas granted a preliminary injunction in a lawsuit challenging the Department of Labor’s authority to raise the salary threshold.
What Does This Mean for You?
For now, nothing. Because the overtime rule did not take effect as planned in December, employers may continue to follow existing overtime regulations.
But if the revised regulation is ultimately implemented, and you’re looking to manage labor costs, the new overtime law will likely have you facing a decision.
Do you raise wages to meet the minimum threshold requirement and keep employees exempt, or do you re-classify exempt employees to non-exempt?
Either way, your decision holds implications for both you and your people, as, if the rule is implemented:
- The exempt salary threshold level will double, increasing from the current minimum of $455 per week, or $23,660 a year, to $913 per week, or $47,476 annually, and
- Payment of nondiscretionary bonuses, incentives, and commissions that are paid quarterly or more frequently may satisfy up to 10% of the new salary amount required.
Incentives Can Help Ease the Burden
Because the ruling states that incentives can supplement salary requirements, you’ve got options. Consider them carefully, as incentives give you the opportunity to leverage solutions that not only feature employer tax benefits and heightened employee productivity, but also allow you to effectively manage your employee merit increases.
Here are just a couple of specific ways you can ease the burden using incentives:
- Rather than raise wages, utilize strategic incentives to allow employees to reach the new threshold (up to 10% of pay); these incentives are paid based on reaching goals, so it’s better for your bottom line
- For those employees you move to hourly status, you will need to find ways to get the same number of people to be more productive so that you don’t have to pay overtime wages or hire additional workers; incentive programs target specific behaviors, encouraging your employees to strive for identified productivity goals
If reinstated, employers may have a grace period to adjust pay practices and employee classifications. But it’s a decision impacting your bottom line; therefore, start strategizing today.