Avoid Salary Surprises with Federal Overtime Rule Change

by Anna Brewer

Federal Overtime Rule Change

The U.S. Department of Labor’s changes to the Fair Labor Standards Act scheduled to go into effect on December 1 raises the federal minimum salary level for overtime pay for FLSA-covered workers to $913 per week, or $47,476 annually. The rule change announced this past spring has many companies already making preparations; the following tips will help businesses ensure they will remain compliant once December arrives.

Know the impacts before the law goes into effect. At many companies, payroll is by far the organization’s largest cost. This is why all businesses need to know how many employees on their payroll will be affected once the rule change takes place. Companies should review the job duties and salaries of workers to determine precisely who will be impacted and how significant those impacts will be.

Decide whether a time-tracking upgrade is needed. Companies may need to employ a new time-tracking system to manage more complex timekeeping situations when workers are reclassified to non-exempt status. Electronic solutions that allow employees to clock in and clock out at their workstations or via mobile devices will likely be the most helpful when it comes to avoiding sudden payroll surprises. Many of these systems allow managers to obtain immediate, up-to-date status reports on their employees’ hours per pay period. Another helpful feature is the ability to receive alerts when an employee is reaching the overtime threshold.

Revisit company overtime rules. Are employees required to obtain written permission from an authorized supervisor prior to working overtime hours? If not, management may want to change protocols and/or policies to better track and control overtime costs. It should be noted that a policy requiring permission to work overtime is valid, but if an employee works overtime and the employer knew or should have known (or, as the FLSA says, “suffers or permits an employee to work”), overtime must be paid, although the employee may be disciplined for not following the policy. For many businesses, new checks and balances will become crucial to ensure that productivity and costs are appropriately managed.

Consider after-hours work policies. Thanks to the rapid rise of mobile computing, the ability to read and respond to work emails in the evenings and on weekends has become commonplace for workers at all levels. However, one must not forget that this work convenience is still considered work, and it could impact a company’s hourly totals. Non-exempt employees are required to be compensated for all the time they have worked, including time spent on work emails while out of the office. Company email policies should be revisited in light of this risk. It is also a good idea to reevaluate which employees truly require offsite access.

Communicate with employees prior to the rule change. Once a company determines if the new rules will have an impact and identifies the employees who will be affected, management should communicate with the affected workers and their supervisors to proactively explain any protocol or policy changes. This is also a good time to address after-hours email expectations.

Salary adjustments may make sense. Finally, some companies may decide to make pay adjustments for some employees whose salaries are near the cap. Doing so could reduce some of the timekeeping complexities the law could create. Employers need to know that a salary increase alone does not guarantee an employee is exempt from overtime, because there are also “duties tests” that must be met for an exemption to apply.

Anna Brewer is the director of HR administrative compliance at Insperity, which provides human resources products and services

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