New rules for overtime will be in place as of December 2016, and there are some important changes to know about in order to be prepared.

YouTube video by US Dept. of Labor

Overtime – Not a favorite topic, but it is rampant in the construction industry.  From large projects, tight deadlines and shrinking labor pools, overtime has become commonplace.  But don’t get too comfortable… You may deal with overtime every pay period, but how you handle it will change due to new overtime regulations that will go into effect on December 1, 2016.

Significant changes are ahead for the way exempt employees will be paid.  To put it simply, overtime pay (time-and-a-half) will apply to salaried employees who are paid less than $47,476 per year.  Essentially, the overtime salary threshold will be raised making all workers below this threshold eligible for overtime pay.  With this change, the employer has options pertaining to the handling of overtime and may choose to exercise one or a combination of the following:

1. Raise the employee’s salary above $47,476/year.
2. Maintain the current salary (below $47,476/year), and pay overtime when applicable (above 40 hours) at an hourly rate of time-and-a-half.
3. Limit workers’ time to 40 hours per week.

The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. (source: DOL.gov)

In addition to increasing the salary threshold for overtime, employers will be able to use nondiscretionary bonuses and incentive payments (including commissions) to fulfill up to 10% of the standard salary level. Such bonuses and incentives may include nondiscretionary incentive bonuses based on productivity and performance; however, unannounced bonuses such as Christmas/holiday bonuses would not apply in this manner as they are distributed at the discretion of the employer. In order to credit nondiscretionary bonuses and incentive payments toward a portion of the standard salary level test, payments must be made on a quarterly basis (or more frequently); “catch-up” payments will also be permitted. In the case of larger bonuses, the amount that may be credited toward the standard salary level is capped at 10% of the required salary amount.

The initial increases to the standard salary level (from $455 to $913 per week) and highly compensated employees total annual compensation requirement (from $100,000 to $134,004 per year) will be effective on December 1, 2016. Future automatic updates to those thresholds will occur every three years, beginning on January 1, 2020.

For details on the new requirements and to learn more about the overtime final rule, visit the Department of Labor’s website and its list of Frequently Asked Questions.  For more information on construction business and marketing tips, stay connected with the HBW Blog.  To get ahead of construction activity and gain access to the latest permitting data in Florida, Texas, Georgia, Alabama and Oklahoma, contact HBW for more information on construction data reports and industry leads.