The U.S. Department of Labor has recently proposed a rule change that would make millions of new employees eligible for overtime pay. Under the Fair Labor Standards Act (FLSA), miscalculating overtime pay can lead to significant penalties for businesses today. The Department of Labor aims to update the salary level required for exemption to "ensure that FLSA's intended overtime protections are fully implemented, and to simplify the identification of nonexempt employees," making employee exemption easier for employers and workers to understand and apply (Source). Essentially, if hours aren't accurately paid, the result can be excessive fines and penalties imposed on your business. Read further for a better understanding of the rule changes associated with these new overtime regulations.
Who Will Be Eligible For Overtime Under The New Proposal?
Let's get this straight: all hourly workers are currently eligible for overtime pay, regardless of their current rate of pay. The new rules will apply to salaried workers, as employers typically don't have to pay premium rates to salaried employers who earn more than $23,660 per year--under today's regulations (Source).
Under the proposed changes, the U.S. Department of Labor intends to raise the threshold to approximately 50,440 in 2016 with yearly automatic increases to prevent any outdating of the rule.
Contemplate Changes To Your Exempt Status Employees
Small organizations should consider undergoing an FLSA analysis (what essentially amounts to a "duties test") in order to determine which employees are properly classified as exempt or non-exempt under the proposed new laws. If classifying specific employees as exempt does not fit within the current proposed rule changes, the employee’s status may need to be updated to non-exempt or hourly.
These proposed changes can also impact those employees with remote working arrangements, as it can be difficult to accurately track such hours. The end result can be a loss in the work-life balance that so many employees enjoy today if a conversion to an hourly pay scale is the only answer.
Remote Employees & Time Tracking
Are you currently tracking your exempt and non-exempt employees with a workforce management solution? Considering the proposed changes described herein, the management of your employees’ time is critical for compliance. A scheduling and time tracking software solution will ensure that you are protecting organizational and employee interests at all time while ensuring compliance to all governmental regulations.
How To Prepare For The Proposed New Rules
We recommend that all employers take the following initiatives in order to ensure compliance with The U.S. Department Of Labor's proposed new rules:
Categorize all exempt employees with salaries that fall below the proposed new salary threshold using $970 per week, or $50,440 per year.
When restructuring those employees requiring reclassification, accurately compute total hours worked per week and ensure accuracy moving forward.
The new regulations are inevitable and businesses will have to comply. Employers have a multitude of options, but will need to strategically beginning plan for these changes prior to rule enactment. There is positive news, however. It's likely that these new rules won't take effect until 4th quarter 2016 or later. Now is the time to start implementing a plan with your business advisors to ensure compliance. Details on the proposed changes can be found in the US. Department of Labor overtime fact sheet attached here. Contact one of our workforce management specialists for an overview of the proposed rules and a critique of your current workforce practices.
In addition, we recommend downloading our new guide, "What's Draining Your Company Profits?" to further identify cost savings that can positively affect your business and position you to be ready for these proposed new changes.