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Your Guide to 2020 FLSA Changes

As an employer, there is one big change coming in 2020 that you have to prepare for: adjusted Fair Labor Standards Act (FLSA) rules regarding overtime pay eligibility. Whether you’re struggling to accommodate these changes, or you’re struggling to handle payroll accounting in general, Integrity Employee Services is here to help with comprehensive payroll services. Read on to learn more about the changes to FLSA, and contact Integrity today to make sure you’re ready!

What Happened

The Department of Labor released new rules updating the Fair Labor Standards Act and expanding who qualifies for overtime pay. This means that an estimated 1.3 million people will become eligible to be paid an additional 50% of their ordinary salary on top of their regular pay – also called “time and a half” pay – if they work beyond 40 hours a week. As an employer, it’s your responsibility to understand who among your workers may fall in this category come Jan. 1, 2020.

New Standards

The biggest change to the Fair Labor Standards Act is an update to the salary level used to limit overtime payments. Before this change, the standard salary level used to determine eligibility was capped at $455 per week (or $23,000 a year). This standard had not been changed since 2004, and so it was updated to reflect inflation and changed cost of living.

Changes to FLSA include:

  • A new standard salary level of $684 a week or $35,568 a year
  • A new total annual compensation requirement for highly compensated employees (HCEs) of $107,432
  • An allowance for employers to use nondiscretionary bonuses and incentive payments (including commission) towards up to 10% of an employee’s salary level
  • Revised special salary levels for workers in the motion picture industry and workers in U.S. territories

One thing to keep in mind is that states are allowed to establish their own standards for overtime pay as long as they are more inclusive than the federal standards. The new FLSA rules essentially dictate a minimum number of employees who must be paid for overtime work. If your state dictates a broader definition of who is eligible, you will be held to that standard instead.

Who Qualifies

This update to FLSA expands who may be eligible for overtime pay, so anyone previously eligible for overtime pay should still qualify. To clarify, however, here are a few general guidelines of who is likely to qualify for overtime pay:

  • Any employee paid hourly
  • An employee with a W2 tax form who earns less than $35,568 a year
  • Employees performing repetitive manual labor
  • Employees in positions that do not require a college degree

Exemptions

There are also guidelines to help determine which employees do not need to be paid overtime. For one, supervisors or managers typically do not qualify for overtime pay. Highly compensated employees (HCEs) who make $107,432 or more a year – and satisfy a “duties test” set by the Department of Labor – also do not qualify. Other exempt employees typically have to meet the following three criteria:

  • Paid a fixed, predetermined salary not subject to reductions based on the variation in quality or quantity of their work (“salary basis test”)
  • Paid at least $684 a week (“salary level test”)
  • Primary duties performed include executive, administrative, or professional duties (“duties test”)

How Integrity Can Help

Ordinary payroll accounting for a business can be complex in and of itself, especially for small businesses with limited staff and a limited budget to hire payroll experts. Changes like this update to FLSA can make it even harder to keep up. However, you don’t have to handle this alone — Integrity Employee Leasing is in business to help your business!

We offer payroll outsourcing services so you can take advantage of our expertly trained specialists. Every member of our team is dedicated to staying up to date with regulations such as FLSA so you don’t have to worry about potentially costly mistakes or noncompliance. As if that weren’t compelling enough, we also offer these services to many of our clients free of charge! Contact us today to learn more about what we have to offer and how we can benefit your company.

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