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New Overtime Rule

Effective December 1, 2016—only 113 days from now—the new overtime “final rule” will change a variety of facets of the previous overtime law.

The final rule will:

  • Raise the previous employee salary threshold for eligibility from $455/week to $913 ($47,476 per year),

ensuring protections to 4.2 million workers.

  • There is an exception to the $913-per-week rule: it’s when employers will count nondiscretionary bonuses and incentive payments (including commissions) toward up to 10% of the threshold.
  • In that case, exempt employees must be paid at least $821.70 per week. Then, when bonuses are paid out, the employees’ pay for that quarter must average out to at least $913 per week.
  • Automatically update the salary threshold every three years, based on wage growth over time.
  • Provide overtime protections for salaried workers already entitled to overtime.

How it affects employers:

So what does the new “final rule” mean for entrepreneurs and small business employees? Basically, any employees whose salaries are not equal to or are less than the threshold salary ($47,476) are entitled to time-and-a-half pay after they’ve worked 40 hours in a week.

From a management perspective, business owners have a few options:

  • Keep your employees at 40 hours per week or less, even if they were previously working longer hours.
  • Simply pay time-and-a-half for overtime, although those could add up quickly.
  • Raise employees’ salaries above the new threshold, therefore, those workers would no longer qualify for the overtime protections.

Tip: As stated, the new salary threshold kicks in Dec. 1, 2016.

December 1st is a Thursday, and because of that you don’t want to have employees’ new salaries or classifications kick in on that day.

So, instead, it has been advised to make the change the week of Thanksgiving. Due to the holiday, it’s unlikely newly OT-eligible employees will have to work overtime that week, which can make the transition a lot easier (without making it more expensive).