Editor’s note: On May 18, the US Department of Labor released its final rule regarding the changes to the overtime threshold for the Fair Labor Standards Act. Among other things, the Labor Department has doubled the minimum salary needed to qualify for these exemptions, from the previous level of $455 a week (or $23,660 a year) to $913 a week (or $47,476 a year), with increases every three years thereafter. This article, originally published on April 11, has been updated to reflect the final ruling.]

After months of speculation, on May 18, the US Department of Labor released its much-anticipated final rule that raises the white collar overtime exemption threshold under the Fair Labor Standards Act (FLSA). The new regulations take effect on Dec. 1, 2016.

The revised overtime pay regulations, which are estimated to affect at least 4.2 million American workers, will increase the salary threshold for the overtime exemption from $455 a week ($23,600 annually) to $913 a week ($47,476 annually).

As a result of this regulation, businesses will need to start tracking hours for exempt salaried employees who are at or below the $47,476 threshold, said Stacey Browning, executive vice president and chief strategy officer for Paycor, a provider of HR and payroll software.

“Many employers do not currently track the number of hours their salaried employees work. If you do not track these employees’ hours, you should begin doing so immediately,” she said.

AccountingWEB asked Browning eight questions regarding the final regulations, touching on topics such as the reasoning behind the changes, pros and cons, and the important role CPAs will play in helping their small business clients comply with the new rules.

Stacey Browning: The changes can be attributed in part to the fact that a growing number of employees are working more hours and not being compensated for them. At the heart of the final rule is the Department of Labor’s attempt to comply with President Obama’s goal of ensuring workers receive “a fair day’s pay for a fair day’s work.” The memorandum signed by President Obama on March 13, 2014, instructed the Department of Labor to look for ways to modernize and simplify FLSA regulations while ensuring that the FLSA’s intended overtime protections are fully implemented.

The final rule isn’t necessarily about collecting more fines on businesses. On one hand, increasing the exemption salary level is broadly beneficial and seems to make good common sense. The initial white collar exemption level was set in 1975 and hasn’t been changed since. Forty years’ worth of inflation has put a $23,600 per-year salary below the poverty line in today’s society, whereas in 1975, it placed someone in the upper 38 percent of workers. The poverty line for a family of four was $24,008 in 2015.

Also falling under the “common sense” approach, one of the stipulations of the Department of Labor’s threshold increase is for the white collar exemption salary to be tethered to the poverty line, which will more easily facilitate future increases or alterations.

AW: What are some pros and cons of the new regulations?

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