Managing Staff Overtime
The FLSA overtime regulation update, finalized on May 18, 2016, will have far-reaching impact.
There are an estimated 4.2 million currently exempt employees earning less than $47,476 per year in the US.
And, as of December 1st 2016, they will become eligible for overtime. For every hour worked beyond 40 hours per week, they will be entitled to receive overtime. Many employers will need to find new ways to track hours worked by these workers.
The update introduces new regulatory compliance risk for employers, as well as significant, potential cost, raising the minimum salary threshold of exempt employees to $913/week from the current threshold of $455/week. On an annual basis, the minimum jumps from $22,660 to $47,476/year, an increase of over 100%.
Countdown to the December 1, 2016 Effective Date:
Employers should start preparing now.
Understand the Impact for Your Organization:
The first step every employer should take is to analyze the potential impact on their organization. It’s important to understand who on your team is currently exempt and will fall under the new threshold.
- How many of your exempt staff currently make less than $47,476 / year and work more than 40 hours per week?
- What are the total hours currently worked by these employees?
- What is the impact of having to pay these employees overtime under the new regulation? Find out using our calculator.
Review Optimization and Compliance Strategies:
Once you understand who will be impacted, you should potential strategies to manage compliance. These may include:
- Converting some staff to hourly and managing time to minimize overtime
- Spreading responsibilities, by distributing work across a team to minimize the potential for overtime. This may involve change the mix of full-time and part-time staff.
- Raising salaries to meet the new minimum threshold
- If you make no changes in approach, you should prepare to track hours worked and plan on paying overtime for any hours worked beyond 40 hours per week, for employees that fall under the new exempt minimum.
Build and Implement a Compliance Plan:
Unplanned overtime will have far more serious consequences under the new regulations. For any situation where a salaried employee is making under the minimum, it is critical that employers have a auditable means to track their hours. Employers need to plan ahead and start to build a compliance plan that considers the following:
- Communication with employees who will become eligible for OT under the updated overtime regulations. Inform your staff of the new policy and how your compliance plan may impact them.
- Build processes to ensure that hours for all OT eligible employees are proactively managed, tracked and auditable.
- Provide training for managers to help them better manage overtime tracking, this may be new to many managers.
- Automate leave and absence management to avoid unplanned overtime.
- Build a culture of accountability and record-keeping with all staff managers and staff
- Review your workforce management tools with a focus on accuracy, the ability to audit hours, and ease of compliance.
To learn more about tracking hours for your salaried staff, contact the experts at SmartLinx.
Or, simply request a demo!