The Federal Government (You know those people that are here to help you!) have made changes to the overtime rules which take effect as of January 1, 2020.
For “white collar” employees, “pencil pushers” and managers who receive a salary but not overtime, they must now be paid $684.00 per week or $35,568 per year, to avoid paying overtime. This is a 50% increase from the old level of $455.00 per week or $23,600.00 per year.
How does this effect you?
For Example: Della, a salaried employee works on average 45 hours per week and makes $640.00 per week or $32,280.00 per year. Her hourly wage would be $16.00 per hour.
Before January 1, 2020: No overtime pay is due.
After January 1, 2020: Della will receive her base pay of $640.00 per week, plus overtime pay of 5 hours per week at $24.00 per hour ($16.00 per hour x 1.5 = $24.00 per hour). This is an extra $120.00 per week or $6,240.00 per year in wages. Annually, she will now be making $38,520.00
You can still meet the new threshold if 10 percent of the base salary comes from GUARANTEED bonuses and incentive payments (including commissions) that are paid at least annually.
This does not mean that you must raise the pay of all salaried employees, but it does mean that if they do NOT meet the new minimum pay levels, they must receive weekly overtime at 1 ½ times the hourly rate.
- Raise the salary to at least $684.00 per week or $35,568 annually or
- Convert the salaried employees to hourly and pay the overtime rate of one-and-one half times the employees’ regular pay rates for all overtime hours worked.
(In Della’s case, it would be less expensive to raise her pay than pay her over time.)
From all of us at Main Street Development and Addis Law offices, we wish you a joyous holiday season and a prosperous 2020. Talk to you next year.