Labor Department: New salary threshold for overtime pay | KPMG | GLOBAL

Labor Department: New salary threshold for overtime pay

U.S. Labor Department rules on overtime pay

The Wage and Hour Division of the U.S. Labor Department today released for publication in the Federal Register a final rule and an announcement of policy concerning overtime pay.


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As explained in the announcement of policy [PDF 292 KB], the final rule revises the regulations implementing an exemption from minimum wage and overtime pay for executive, administrative, professional, outside sales, and computer employees. These exemptions are frequently referred to as the “white collar” exemptions. To be considered exempt from overtime pay, employees must meet certain minimum requirements related to their primary job duties and, in most instances, must be paid on a salary basis at not less than the minimum amounts specified in the regulations. 

Today’s final rule [PDF 1.96 MB] updates the salary level above which certain white collar workers may be exempt from overtime pay requirements from the previous level of $455 per week (the equivalent of $23,660 per year) to a new level of $913 per week (the equivalent of $47,476 per year). 

The final rule is effective December 1, 2016, so as to provide employers sufficient time—more than 180 days—to make changes that are necessary to comply with the final regulations.

The final rule and the related announcement of policy will be published in the Federal Register on May 23, 2016.

KPMG observation

Overtime payments are subject to income and employment tax reporting and withholding. Thus, employers will want to adjust their payroll systems and make other appropriate adjustments during the 180-day effective date delay.

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