November 10, 2016
Hello Leaders!
Welcome to The Nelson HR Review! We have only a few weeks left before we must comply with the new overtime law, effective December 1, 2016. This newsletter review focuses on compensation to help you prepare.  Also, please view the webinar below to help get ready for the new law.

As always, call me at (877) 356-6175 for any questions or assistance with HR issues. Have a fantastic week!  

Vanessa G. Nelson
New Overtime Rule in Effect Dec 1, 2016
10 Steps to Prepare
In May 2016, the U.S. Labor Department released the overtime final rule to update and increase the standard overtime rule salary level for executive, administrative and professional exemptions and the minimum total annual compensation level for the “highly compensated  employee” exemption under the Fair Labor Standards Act.
The effective date of the rule is December 1, 2016.

The Final Rule focuses primarily on updating the salary and compensation levels needed for Executive, Administrative and Professional workers to be exempt. Specifically, the Final Rule:
  • Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South ($913 per week; $47,476 annually for a full-year worker);
  • Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
  • Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.

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

What Should Employers Do Now to Prepare?

The new regulations can have a substantial impact on employers. Employers should start preparing for a complete review of exempt classifications under the new rules. This will be a large undertaking, and planning for the process should start now.

The number of employees who may be entitled to overtime is likely to increase. Employers should begin now to evaluate their tracking of employee work hours and consider how those tracking procedures may need to change to address any employees who are no longer exempt.

Additionally, employers should:
  1. Familiarize themselves with current exemption compliance criteria, i.e. Administrative, Executive, Highly Compensated Employee, etc.

  2. Make sure management has an understanding that proposed regulations are coming and will have a potentially disruptive effect on the business, i.e., may have to reclassify a large number of employees from exempt to non

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