Federal Overtime Changes Took Effect December 1, 2016

bookkeeping-615384__340Do you have employees currently paid by salary rather than an hourly rate? If so, review what you pay to make sure you are in compliance with the new law that took effect December 1. The Department of Labor has established a minimum amount that must be paid to avoid overtime.

The federal standard for salaried employees increases to $47,476 per year ($913 per week). Highly compensated employees must earn $134,004.($2577 weekly). Employees must also fall under specific categories to be considered exempt from overtime.

Administrative employees: Their work must be office or non-manual work, must be directly related to management or general business operations of the employer or the employer’s customers, and also must primarily involve independent judgment and discretion about significant matters.

Executive employees: They must regularly supervise two or more other employees, have some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments), and also must have management as the primary duty of the position.

Computer Employees: They must apply system analysis techniques and procedures including consulting with users to determine hardware, software, or system functional specifications and design, development, documentation, analysis, creation, testing, or modification of computer systems or programs.

Exempt Professionals: The traditional “learned professions” are generally exempt. These include lawyers, doctors, dentists, teachers, architects, and clergy. Also included are registered nurses (but not LPNs), accountants (but not bookkeepers), engineers who have engineering degrees or the equivalent and perform work of the sort usually performed by licensed professional engineers, actuaries, scientists (but not technicians), pharmacists, and other employees who perform work requiring “advanced knowledge” similar to that historically associated with the traditional learned professions.

Professionally exempt work must be predominantly intellectual, require specialized education, and involve the exercise of discretion and judgment. Professionally exempt workers must have education beyond high school (and usually beyond college) in fields that are more “academic” than the mechanical arts or skilled trades. Advanced degrees are the most common measure of this, but are not absolutely necessary if an employee has attained a similar level of advanced education and performs essentially the same kind of work as similar employees who do have advanced degrees.

Creative professionals: This includes actors, musicians, composers, writers, cartoonists and some journalists. It is meant to include employees who contribute a unique interpretation or analysis in jobs whose work requires invention, imagination, originality or talent. Sometimes identifying professionally exempt jobs is not as straightforward as some of the other categories. For example, determining the status of jobs like commercial artists and journalists requires additional analysis of exactly what the employee does.

If your employee does not fall into the above categories and/or is not paid the minimum wage to be exempt from overtime, you must pay them an hourly rate and pay overtime for any hours worked over 40 per week. Be advised that many states have more strict guidelines, and overtime must be paid if working over 8 hours in a day. Check your state guidelines to make sure you meet all requirements.

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