Business owners will take on extra payroll costs under the new overtime regulations but won’t see much change to the existing laws under the Fair Labor Standards Act (FLSA).
Taking effect December 1, the U.S. Department of Labor’s new overtime rules extend overtime protections to 4.2 million workers. The threshold rises from $23,660 to $47,476. This means nearly all workers on lower salaries are entitled to time-and-a-half pay whenever they work more than 40 hours in a week. It also means businesses will need to accurately track all hours for their employees to comply with the FLSA, especially for employees earning less than $47,476.
Employees who are used to choosing the hours they work could now face new monitoring for work hour requirements such as:
- 8-hour daily schedule
- Completing work within a set time frame
- Taking scheduled rest periods and meal breaks.
The simplest way to track hours is with software and digital time sheets.
Even supervisors, managers and professional workers who telecommute may find themselves having to record the time they work away from the office, which could cut into any sense of flexibility or autonomy that an exempt employee currently enjoys.
Less experienced workers stand to gain the most, particularly those new to the workforce, such as recent college graduates who tend to earn $30,000 to $40,000 a year in entry level positions. The shift from a fixed salary to tracking work hours is bound to increase the compensation paid to millennials when they work more than 40 hours per week.
One downside for employers is the added cost of providing overtime pay to more of their workers. Meeting these payments could mean spending cuts in other areas.
In some cases, businesses might choose to completely overhaul their payment structures to deal with the Department of Labor’s new rules.
The Department is mainly concerned with each employee’s job duties and whether the essence of a position is managerial or professional.
Still, it may be better to classify employees that perform non-managerial tasks as non-exempt so that they’ll be eligible for overtime pay.
However, if exempt employees must be reclassified as non-exempt, business owners will need to start tracking overtime, meal breaks and rest periods to ensure compliance with general labor laws.
Shifting responsibilities so that work can be completed on a 40 hour work week schedule might involve changing employees’ roles, training employees on new duties and implementing a new system of operation.
Businesses can get prepared by following these auditing tips
- Review the business’s compensation structure to see who is affected by the change.
- Get a head start on these issues by educating staffers. “You may have to explain why you are now keeping closer track of hours worked for all staff,” said Barbara Hoey, an attorney in the labor and employment legal practice of Kelley Drye law firm in New York.
- Review jobs and tasks assigned to employees and conduct a time analysis of who is working overtime under the new law. “Consider their job duties, whether they are being completed in a time efficient manner and if the job could be performed by a second employee,” said Mary D. Smith who founded Reliance Payroll where she acts as the firm’s human resources and payroll manager.
- Complete a cost-benefit analysis. “Determine if the firm can afford to keep exempted employees or if they must reclassify them as non-exempt,” said Nannina Angioni, a labor and employment attorney and partner with the Los Angeles-based law firm Kaedian.
- Track overtime, meal breaks and rest periods to ensure compliance with general labor laws.
- If overtime pay could be costly, adjust duty responsibilities so that work can be completed on a 40 hour work week schedule.
- Evaluate whether it is more cost efficient to hire part time workers to replace the positions that qualify for overtime pay.
- Review existing time tracking systems and if necessary upgrade. Update current time sheets or create new ones.
- Clarify manager’s duties. “Determine whether they supervise more than two employees; do they recommend hiring and firing; and do they discipline workers or have some meaningful role in those decisions,” said Hoey
- Keep a record of hours worked for all staff, exempt or non-exempt, in case there is a challenge to the status of an employee or a job title later.
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