Exempt employees overtime rules can be a complex and confusing topic for both employers and employees. An exempt employee is one who is not eligible for overtime pay, while a non-exempt employee is entitled to receive overtime pay for any hours worked over 40 hours in a workweek. However, just because an employee is exempt does not necessarily mean they are not entitled to some form of compensation for overtime work.
Highly compensated employees, for example, may receive comp time or catch-up payments instead of traditional overtime pay. It's important for employers to track time accurately and ensure that all exempt employees are properly classified, as misclassification can result in costly legal battles and penalties from the Department of Labor (DOL). In this article, we will answer frequently asked questions (FAQs) about exempt employees' overtime rules and provide guidance on how to protect lower-paid exempt employees and comply with minimum wage laws.
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Understanding the Rules of Overtime for Exempt Employees
Exempt employees are those who are not entitled to overtime pay. However, the Department of Labor issued a new rule that became effective on January 1, 2020, making more employees eligible for overtime pay. In addition to highly compensated employees, those who make less than $35,568 per year are now entitled to receive overtime pay if they work more than 40 hours per week.
It's important to note that exempt employees still have certain rules regarding their pay and working hours. While they may not be paid overtime, they must still be paid for all hours worked and must receive at least the minimum wage. Understanding these rules can help employers avoid costly lawsuits and ensure that their employees are being treated fairly under the law.
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Get the Inside Scoop on Overtime for High-Paid Workers
If you're an employee earning a high salary, you may be wondering if you're entitled to pay overtime. The answer is that it depends on your designation as either exempt or non-exempt. Highly compensated employees (HCEs) are considered exempt, meaning they're not entitled to receive overtime pay.
To be considered highly compensated, an employee earns at least $107,432 per year including at least $684 per week paid on a fee basis. Additionally, the employee must perform non-manual work and customarily and regularly perform one or more exempt duties of an exempt executive, administrative, or professional employee.
In other words, employees who have the HCE designation may not receive overtime pay even if they work extra hours. However, keep in mind that commissions, nondiscretionary bonuses, and other forms of nondiscretionary compensation count towards an employee's annual pay when determining their HCE status. Want to learn more about overtime rules for high-paid workers? Keep reading our blog!
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Why Tracking Time for Exempt Employees is Important
Many employers believe that exempt employees are not required to track their time because they are paid a salary. However, this is not true. The Department of Labor (DOL) regulations specifically state that exempt employees must meet FLSA requirements, which includes tracking their time.
Tracking time for exempt employees not only helps employers comply with DOL regulations but also ensures that employees are being compensated correctly. Weekly pay for exempt employees is based on a predetermined amount, and any overtime worked must be compensated accordingly. By having time clocks or other systems in place to track hours worked, employers can accurately calculate overtime pay and avoid potential legal issues. It also allows employees to complete their hours within the workweek and avoid burnout from working overtime without compensation. In conclusion, tracking time for exempt employees is crucial in ensuring compliance with FLSA regulations and fair compensation for all parties involved.
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Understanding When Overtime is Due to Exempt Employees
When it comes to exempt employees, the rules for overtime pay can be a bit confusing. The Fair Labor Standards Act (FLSA) labor requires that most employees receive overtime pay when they work more than 40 hours in a week, but exempt employees are not eligible for overtime pay. However, starting Jan 1 2020, the salary threshold for exempt employees will increase from $23,660 to $35,568 per year, which means that some currently exempt employees may become eligible to receive overtime pay if they do not meet this new salary threshold. It's important for employers to stay updated on these rules and ensure that all of their employees are properly classified and compensated for their work.
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Opting for Comp Time Instead: A Better Alternative?
Opting for comp time instead of paying overtime could be a better alternative for employers with exempt employees. Comp time allows these employees to receive extra time off work in exchange for the extra time worked, such as travel time for a trade show. This can be more appealing to an exempt employee rather than receiving payment for overtime hours worked. However, it is important to note that giving time off instead of paying overtime may not always be an option and must comply with the rules and regulations set forth by the Department of Labor.
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Using Bonuses or Catch-up Payments To Get an Exempt Employee Above the Minimum
One way to get an exempt employee above the standard salary requirement without violating overtime rules is by using non-discretionary bonuses or incentive payments including commissions. These types of productivity sales bonuses can be used to make catch-up payments and increase an employee's salary, as long as they are not solely based on hours worked. However, it is important to carefully review and comply with all overtime regulations before implementing any compensation changes.
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What Types of Employees Are Exempt?
The Fair Labor Standards Act (FLSA) states that certain employees employed in a bona fide executive, administrative, professional, or outside sales capacity are considered exempt from minimum wage and overtime pay. These employees are called white collar exemptions.
Sales employees who perform their duties away from the employer’s place of business and who meet certain salary requirements may also be considered exempt. Computer employees who meet specific types of job duties and salary requirements may also be exempt from minimum wage and overtime requirements.
To qualify for a white collar position, an employee must earn a minimum weekly salary and perform specific types of job duties that are related to their role within the company. Overtime includes any hours worked over 40 hours in a workweek, and it is important for employers to understand the overtime requirements for each type of exemption to ensure compliance with FLSA regulations.
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Frequently Asked Questions
Who is exempt from overtime?
Exempt employees are not entitled to overtime pay and include executive, administrative, professional, outside sales, and computer employees who meet certain criteria for job duties and salary.
What does non exempt overtime mean?
Non-exempt overtime refers to the extra pay an employee is entitled to when they work beyond their regular hours. It applies to workers who are not exempt from overtime laws, such as hourly employees or those who earn less than a certain salary threshold.
What is the non-exempt overtime rule?
The non-exempt overtime rule is a federal law that requires employers to pay eligible hourly employees 1.5 times their regular rate of pay for any hours worked over 40 in a workweek. This rule does not apply to salaried employees who meet certain exemption criteria.
What occupations are exempt from overtime?
Typically, exempt occupations from overtime pay include executive, administrative, and professional roles that meet certain criteria such as a minimum salary threshold and job duties.
Are exempt employees eligible for overtime pay?
Exempt employees are not eligible for overtime pay as they are exempt from the Fair Labor Standards Act's (FLSA) minimum wage and overtime pay provisions.
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