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  • Writer's pictureTRS CPA



Last week, the Labor Department finalized a new rule that’s expected to make an additional 4.2 million salaried workers eligible for overtime pay. The rule raises the salary threshold at which white-collar workers are exempt from overtime pay from $23,660 to $47,476. Workers have to perform very specific duties to meet the overtime exemption. For example, performing “executive” duties means supervising the work of two or more employees and “administrative” duties requires the exercise of discretion and independent judgment, among other criteria. This Labor Department fact sheet explains the job requirements to meet the overtime exemption. The company should also check to make sure that they meet the criteria to fall under the Fair Labor Standards Act.

Employers have various ways to comply with the new rule. They can simply start paying overtime. Or alternatively, they can also raise an employee’s salary to the new threshold to avoid shelling out overtime or they can instruct affected employees not to work more than 40 hours a week and bring on part-time workers to pick up the slack. Some employers are expected to cut the base pay of affected employees to offset the new overtime payments, effectively keeping their weekly paychecks unchanged. That’s legal but it would undermine the intent of the new rule, which is to put more money in workers’ pockets. Regardless of how the employer decides to tackle the problem, they will need to make sure their payroll and time keeping system is set up to track hours for the affected employees in order to properly document when the overtime rate would apply. If you have any questions please feel free to give us a call.

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