Employers may have to adjust their strategies for complying with overtime requirements in light of the new Fair Labor Standards Act (FLSA) overtime rules. Up until now, employees who met the administrative, professional and executive exemption standards and made more than $23,660 a year or $455 per week were exempt from the FLSA's overtime and minimum wage requirements.
New rules announced by the U.S. Department of Labor, set to go into effect Dec. 31, 2016, have raised that threshold to $47,476 a year or $913 per week. This shift is projected to make more than 4 million workers eligible to receive overtime pay 1.5 times their regular rate of pay for every hour worked in excess of 40 hours in a workweek.
According to USA Today, many businesses will likely respond to this rule by converting their exempt employees to non-exempt classifications, making them entitled to overtime. Companies will likely adjust their employees' base pay above the new threshold and place strict restrictions on overtime hours. Employers should take care to ensure that exempt employees still perform the job duties necessary to qualify for the exemption.
Here are some strategies you can put into place to help you comply with the new FLSA overtime rules in a cost-effective way:
1. Conduct a Thorough Audit of Your Current Overtime Costs
One of the best ways for you to get a handle on your overtime costs is to perform a comprehensive audit. Track how many hours in excess of 40 hours per week exempt employees are working to help determine how much overtime would cost if you do not raise these employees' salaries to meet the new minimum.
2. Create a Distribution System Among Employees
You should strive to implement a policy in which overtime duties are distributed fairly among your employees to help avoid any employee resentment concerning unequal access to overtime pay, while at the same time ensuring that you're never left shorthanded. Alternatively, consider redistributing duties to help limit overtime costs.
3. Modify Staff Schedules to Meet Demand
Throughout the year, your business likely experiences different levels of demand. By adjusting staff schedules — staffing up during periods of high demand, and staffing down during slower periods — you may help improve efficiency and limit overtime.
4. Look Closely at Employee Classification
When managing overtime compliance, you must occasionally re-evaluate exempt employees' job duties and salaries to ensure they continue to meet exemption criteria. Reclassifying employee to non-exempt typically involves additional oversight. It's important to keep in mind that the penalties for employee misclassification under the FLSA can be costly. Some states may have their own overtime requirements and penalties, as well.
5. Improve Time Tracking Practices
If you're encountering unanticipated overtime demands, there may be a problem with your time-keeping approach. In this scenario, you may want to seek out additional tools and systems, such as mobile apps that are specifically designed to track employee hours as a means of anticipating overtime thresholds.
6. Promote Employee Cross-Training
Sometimes it's necessary for a particular employee to work overtime because he or she is the only one equipped to perform a specific task. As such, it may be beneficial for you to provide cross-training to give employees the necessary knowledge to take on additional duties. This is particularly useful in times of greater customer demand or labor shortages.
As long as your business is flexible enough to incorporate some new approaches to controlling overtime demands, complying with overtime requirements can be done in a more cost-effective manner.
* A U.S. District Court has temporarily blocked the new overtime rules from going into effect on December 1, 2016. Read the Eye on Washington to learn more.
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