On Dec. 12, 2019, the U.S. Department of Labor (DOL) announced a new final rule clarifying how to calculate an employee’s regular wage rate under the Fair Labor Standards Act (FLSA). The regular rate is used to determine an employee’s overtime compensation, and guidelines related to this calculation haven’t been significantly updated in over 60 years. Employers will need to familiarize themselves with the new guidance, adjusting their payroll practices for Jan. 15, 2020, when the final rule comes into effect.
As it stands, calculating the regular rate requires employers to include an employee’s wages, commissions, bonuses, payments received in the form of goods (e.g., room and board) and premium payments (e.g., incentive payments for dirty work). However, under the current guidance, it can be difficult for employers to discern what role certain perks and benefits play in regular rate of pay calculations.
The updated rules are designed to account for newer forms of employee compensation and benefits, such as fitness and nutrition classes, weight loss and smoking cessation programs, health risk assessments, paid sick leave and other fringe benefits. Specifically, the DOL’s final rule clarifies that the following employee benefits can be excluded from the regular rate, which in turn makes it easier for employers to offer perks to their workers:
- The cost of certain parking benefits, wellness programs, on-site specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits and adoption assistance
- Payments for unused paid leave
- Payments of certain penalties required under state and local scheduling laws
- Reimbursed expenses, including cellphone plans, credentialing exam fees, organization membership dues and travel
- Certain sign-on and longevity bonuses
- The cost of office coffee and snacks
- Discretionary bonuses
- Contributions to benefit plans for accident, unemployment, legal services or other events that could cause future financial hardships
- Call-back pay
For more information, review the official news release from the DOL here.
Regulatory changes are constantly being released from different agencies. Contact us today and let us help you navigate these updates and ensure that your business is compliant and efficient.
