Over the past few weeks, there has been a lot of talk and discussion about the new rules and regulations that will come into action, relating to overtime. Recently, the US Department of Labor announced final updates to the new overtime rule that will allow all employers to offer perks and other benefits to their employees, much more easily. This rule is actually one of the most important updates made to the existing rules in half a century!
Here is what the rule says:
The new rule defines what perks and benefits need to be included in the regular rate of pay and which perks and benefits are left to the discretion of the employers. More specifically, this final rule makes clear which perks and benefits can be offered by employers, without putting themselves at risk in relation to additional overtime liability. Some of the details include:
- Payments for paid leaves that have been unused, such as paid sick leave
- The cost of offering certain benefits such as fitness classes or memberships, wellness programs and online treatments through specialists
- The cost of providing other facilities such as parking, employee discounts on certain goods and services
- The cost of certain tuition related benefits, such as a student loan program or money paid to an education provider or even assistance for adoption
- Payments of certain penalties which are required under state and local laws
- Reimbursements such as cellphone plans, exam fees for specialized credentials, organization membership fees and dues and official travel
- Certain bonuses, such as those offered for continuity and signing
- Contributions to benefits plans related to accidents, legal services and even unemployment
- Discretionary bonuses
The final updates to the new overtime rules also includes clarifications about various other forms of compensation including those related to time taken for meals and ‘call back’. The DOL is planning to remove the restriction related to ‘call back’ pay, stating that such payments such as sporadic and not something that is done regularly and such payments cannot be arranged beforehand.
Secondly, the basic rate (authorized under section 7(g)(3)) has been updated – under the new final rule, employers who utilize a basic rate are allowed to exclude any additional payment that will not increase the total overtime compensation by over 40% of the higher of the stipulated minimum wage.
Here is why the DOL is revising these regulations:
These regulations have not had any serious revisions for almost 50 years now, because since the longest time, compensation included only regular wages, paid time for holidays, contributions to basic medical care, life insurance and disability benefits. However, workplaces have since changed, which means that payroll management and overtime rules needed to be changed too.
Now, employers offer a range of other compensation packages, including wellness benefits, health risk assessments and other facilities to keep track of their health. Similarly, regulations from part 778 have also evolved and a growing number of employers are combining paid sick leave and paid vacation days to create better plans for employees to take time off, without losing pay.
Here is how the economy will be impacted due to this final rule:
The DOL estimates that this final rule could result in the one time familiarization cost of $30.5 million; but the rule will not bring on any new requirements on the employers. The new rule will encourage certain employers to start providing benefits that they might not have been providing, as these could lead to a better work environment.The Final Rule, which has been published on December 16th, 2019 in the Federal Register, will come into effect on January 15th, 2020.