The Clock Is Ticking: Have You Prepared for Department of Labor Overtime Changes?
The Clock Is Ticking: Have You Prepared for Department of Labor Overtime Changes?

The Clock Is Ticking: Have You Prepared for Department of Labor Overtime Changes?

On November 9-10, Paycor hosted its ninth annual HR Web Summit featuring sessions on a variety of topics ranging from the Department of Labor, Form I-9 and EEO-1 Report changes to common trends within the HR industry. The article below provides highlights from one of the most talked-about sessions of the Web Summit – DOL Overtime updates, as Paycor’s DOL expert, Tim Ruge, recaps what you need to know before new changes take effect.

Significant changes have been made to the way the Department of Labor allows companies to pay overtime for employees, and the deadline to start implementation is rapidly approaching. On December 1, 2016, any employee earning under $47,476 will be paid additional overtime wages for any additional hours worked above 40. For a policy that currently only affects those making under $23,660, this rapidly-approaching modification signals a seismic shift.


Update: On November 22, a U.S. District ruled in favor of an injunction blocking the final overtime rules from being implemented on December 1, 2016. At this time, we are awaiting more information on updates to the rule and the final implementation date.

If you have implemented changes already, we recommend businesses not change any plans, pay structures, or policies that have been updated.


This change in overtime calculation is going to impact businesses in a major way. An estimated 64% of businesses will have at least one employee affected by this implementation, and 76% of businesses say the impact to their bottom line will be moderate to significant. And the worst part is, many businesses are completely unprepared for the oncoming change. For a deadline little more than two weeks away, more than half of employers (53.1%) haven’t even informed workers of the change. To avoid being caught unaware yourself, let’s take a look at what this change means.

You have an employee. We’ll call her Jane. Jane currently makes $40,000 per year in salary, which breaks down to $769.23 per week in earnings. If Jane works an average of 50 hours/week, her pay rate will change dramatically under the new OT guidelines. These 10 additional hours worked would translate to an extra $288.83 per week, bringing her weekly pay to $1057.53. This brings her yearly salary to $54,991. Quite a change.

And penalties for not following the changes can be severe. The burden of proof is on the employer to present clear reporting and evidence to dispute claims made by employees of underpayment or overextending hours. Aside from heavy fines levied, employers would incur plaintiff fees and court costs as well. Depending on which state you’re in, employees can back as many as 5 years to make an overtime compensation claim (starting on December 1, 2016).

So what’s the best plan of action? The first word of advice is: DO NOT ESTIMATE. Track all affected employee hours as precisely as possible. Create reports that give you exact hours, pay rate, OT pay rate, etc. to give you every bit of trackable data, not only for current earnings but for any future disputes. And manage those OT hours wisely. They just became a significant expense. Other options for accommodating this new change include:

  • Reclassify employees from salary to hourly, adjusting the hourly rate to reflect overtime expectations. This seems to be the most cost-neutral option.

  • Raise all salaries to at least $47,476. For companies that can absorb the raise, this seems to be the easiest option to alleviate OT issues.

  • Prohibit ANY unauthorized overtime. This sounds like a quick fix, but loss of production per employee adds up quickly.

So if our employee, Jane, works 50 hours per week we would pay her $13.99 per hour if we converted away from salary. If we keep her salary at $40,000 and pay the new OT rate, she’d make an extra $14,991. If we prohibited any overtime, we’d lose around 520 hours of her productivity per year.

This complicated and costly change needs to be dealt with in serious fashion by someone that can be trusted to be an expert in the field. Learn how Paycor is staying one step ahead of these changes.

To listen to the full recording, click here.

This content is for educational purposes only and is not intended to serve as legal advice.


subscribe to Paycor's Resource Center

Subscribe to Our Resource Center Digest

Enter your email below to receive a weekly recap of the latest articles from Paycor's Resource Center.

Check your inbox for an email confirming your subscription. Enjoy!

More to Discover

How to Pay 1099 Employees

How to Pay 1099 Employees

As the gig economy grows more employers are looking to hire independent contractors (aka 1099 workers). But since paying independent contractors isn’t a walk in the park, many employers are looking for step-by-step instructions. Here’s a breakdown of everything you need to know: How Do I Pay a 1099 Worker? This subject is something you will need to discuss in detail with the person you’re hiring for the job. Often, they will have a written contract that stipulates how and when they should be paid. The two most common methods of payment are hourly and by the job or project. Some independent contractors — such as attorneys — prefer to be paid on retainer, which means you pay them a lump sum at the beginning of each month in return for a...

States with Salary History Bans

States with Salary History Bans

Requesting job applicants’ salary histories has been a pretty common practice for employers over the years. Recruiters and hiring managers often use this knowledge to exclude people from the candidate pool, either because the applicant is “too expensive” or their previous salary is so low, hiring managers think the person is poorly qualified or inexperienced.Businesses have also used previous salary information to calculate new hire compensation—a process that can perpetuate pay disparity between women and men. To address this inequality, several states and municipalities have enacted bans on asking for previous salary information, although laws vary in terms, scope and applicability. The states and territories that have enacted salary...

Case Study: Buy Sod

Case Study: Buy Sod

Buy Sod Inc. Partners with Paycor to Pay Employees & Maintain Tax Compliance “Because we’re a niche company, our administrators sometimes have trouble uncovering and implementing best practices. But when we partnered with Paycor they brought the expertise and thought leadership to help us overcome tough challenges like the new EEO-1 report. Paycor has the patience, knowledge and resources to help us stay ahead of problems and grow.” - Jennifer Hillard, Director of People and Culture Why Buy Sod Inc. Chose Paycor In 2002, three family businesses came together to create a network of sod farms that operate and distribute around the country. But with ten locations and eighteen different payrolls to process, Buy Sod Inc. struggled to...

Webinar: Compliance in 2020: What You Need to Know

Webinar: Compliance in 2020: What You Need to Know

A new year brings new compliance issues employers should be monitoring at the federal, state and local levels. To help your organization prepare for what’s ahead, our compliance team will outline key changes in 2020 and trends in the areas of payroll, tax and HR compliance.Speakers: Arlene Baker and James SchwantesArlene Baker is a Senior Compliance Analyst with over 40 years of payroll and tax experience. She’s a member of the National Payroll Reporting Consortium focusing on IRS compliance, and she’s been a member of the national and local APA for 25 years. In 2003, Arlene was awarded the Ohio Payroll Professional of the Year award. James Schwantes is a Compliance Analyst with a legal and tax background. Prior to working at Paycor in...