The Department of Labor released its final rule in May 2016 regarding changes to overtime regulations under the Fair Labor Standards Act (FLSA), which go into effect December 1, 2016. While overtime regulations for hourly workers will remain the same (any hours beyond 40 must be paid at a rate of time and a half), workers must earn a minimum of $913 per week or $47,476 annually to be considered an exempt employee, more than double the old threshold of $23,660.These overtime changes are expected to impact approximately 4 million workers, and potentially affect your workforce. Consider these factors to determine if your company is ready for the proposed overtime rules.
If you have employees who are currently exempt, but whose salary falls below the $47,476 annual threshold, they will need to be reclassified as non-exempt or hourly if you wish to avoid paying overtime on a regular basis. This may end up being a major cultural change with how these employees work, and there is a risk it will be seen as a demotion, so sensitive communication is key.
If you have employees who are no longer salaried or who are earning below the salary threshold, they will have to start tracking their hours. It is essential that you have a timekeeping system in place to avoid miscalculations or fines for noncompliance. This will require additional overseeing on your company’s part, particularly if a significant number of employees are transitioning into hourly positions.
For some salaried positions, it may make more sense from a business aspect to raise their pay above the threshold if working more than 40 hours is likely to be a regular occurrence. When you’re determining possible salary changes, also keep in mind that commission, incentives, and non-discretionary bonuses can be used for up to 10 percent of salary calculations.
For many companies, reducing overtime across the board to save money may not be plausible from a workload standpoint. If your current business model or demand facilitates a need for working additional hours, but the overtime to keep pace would be cost-prohibitive, you may need to consider including temporary employees as part of your staffing strategy during peak times.
Ethan Allen Workforce Solutions’ Professional Employer Organization (PEO) division, Ethan Allen HR Services, may be an ideal solution for your company to ensure it’s ready for the proposed overtime rules. We have the expertise necessary to handle compliance, payroll, and other employment services for your company, saving you the time, money, and stress of tackling it in-house. Learn more about Ethan Allen HR Services and how we can help with your company’s needs.