Today President Obama released an important update to overtime regulation. We're big employment regulation nerds at Gusto—as well we should be!—so we thought we would give you the full run down. Read on for more on what's changing, why, and what this means for both employees and employers.
For the first time since 2004 (12 years!) the US Department of Labor will raise the salary cap for overtime qualification. That means that any hours worked beyond forty in a week would be paid at 1.5 times an employee's hourly rate. Prior to today, only employees earning less than $23,660 per year or $455 per week automatically qualified for overtime pay.
Today, that salary cap goes up to $47,476 per year or $913 per week.1 As long as an employee's earnings stay below that cap, any hours worked beyond 40 in a week has to be paid at 1.5 times their hourly rate.
And don't worry, if all of this sounds complicated to keep track of and calculate, Gusto has your back. We automatically track and calculate overtime pay for you.
Prior to this change, just 7% of American workers qualified for overtime. That's down from the nearly two thirds (62%) who qualified in 1975. After the salary cap hike, 35% of workers will qualify for overtime. So more than a quarter of this country's workforce will be newly qualified for overtime.
For all of those hard workers, you'll have a little more money in your pocket. Might we suggest a vacation to recharge?
This is good news for employers as well. Putting more money in workers' pockets is a huge boost to the economy. With higher salaries, employees have disposable income to go out and buy things. While your employment costs may go up, you benefit from millions of potential customers with more money in their pockets. Woohoo!
If your employees currently earn between $23,660 and $47,476 annually (or between $455 and $913 per week), they are newly qualified for overtime. And where previously bonuses would not count towards the salary cap, the Department of Labor now allows bonuses to satisfy up to 10% of the salary cap.
Our data team tells us that roughly INSERT_PERCENTAGE of our customers have employees that newly qualify. And again, there is nothing you need to change in Gusto. We will automatically calculate the correct payments based on hours worked and year-to-date earnings.
If you would like to learn more, check out the handy FAQ2 provided by the US Department of Labor. Or you can sit back and relax knowing Gusto is taking care of everything automatically.
Just one more way we make payroll a little less taxing.