New Overtime Pay Threshold for Salaried Employees

New Overtime Pay Threshold for Salaried Employees

Managing employee hours and overtime costs has long been a challenge for employers across countless industries. But with the recent major announcement by the United States Department of Labor (DOL) on May 18th to double the required pay threshold to classify employees as salaried/exempt to $47,476, the challenge of properly managing employee hours and overtime has never been more pressing!

With the new overtime guideline anticipated to affect 4.2 million workers who will now be eligible for overtime pay beginning December 1st, the time to prepare is now.

The New Overtime Guidelines

It is standard, legal practice for employers to pay non-exempt (hourly) employees time-and-a-half overtime pay for any hours worked over 40 per week based on the Federal Labor Standards Act (FLSA) pay protection guidelines. In contrast, exempt (salaried) employees are not entitled to such overtime pay based on Section 13(a)(1), which outlines the exemption guidelines for certain employees who meet tests regarding their job duties, including executive, administrative, professional and outside sales staff.

Since 2004, the minimum salary threshold required for exempt status was $455 per week or $23,660 annually for full-year employees. Starting December 1st, 2016, the DOL announced that the new minimum threshold for exempt employee status increase to $913 per week or $47,476 annually.

In addition to the increase beginning December 1st, the Department of Labor announced that the minimum salary threshold will be reviewed and adjusted every three years and that employers may now include some additional forms of compensation other than salary to meet up to 10 percent of the minimum weekly salary requirement, such as non-discretionary bonuses, incentive payments and commissions.

Employer Questions

Although the update is quite simple in concept, the implications of implementation for employers are significant. Some of the most pressing questions for employers are listed below. Although employers may have some difficult decisions to make, fortunately, there are ways to minimize the cost and impact of the new guidelines with an automated timekeeping and scheduling software solution. Those questions may include:

  • Will employers choose to increase salaries for employees under the threshold or simply change certain employees to a non-exempt status?
  • How will employers absorb the potential increase in labor costs?
  • How will overtime costs be impacted across the company for employees now being paid hourly?
  • Will employees be approved for adequate overtime hours to maintain current productivity?
  • How will employers implement time, attendance and scheduling systems to accurately track employee time?
  • How will employers remain compliant and demonstrate compliance with the new guidelines?
  • How will employers minimize the administrative cost and time of tracking hours?
  • How will hours for employees working remotely and/or after-hours be effectively tracked?
  • Will employees who remain exempt be required to work additional hours to offset work for employees who no longer qualify for exemption status and are not authorized for overtime pay?
  • How will exemption status and potential pay rate changes be communicated to employees? What impact will that have on company culture?

Automated Time & Labor as a Solution

Finding ways to reduce administrative and labor costs has never been more important for employers. While managing employee time, schedules, and overtime is always a challenge, the administrative time and cost of labor can be reduced by adopting an automated time and labor software solution. Beyond being an essential tool for compliance and HR productivity, a time and labor application is perhaps the best available solution to minimize overtime costs moving forward.

So how does a time clock or automated timesheet scheduler help? Here are a number of ways:

  • Detect Overtime – With advanced scheduling software, supervisors can not only drastically reduce the time it takes to build and adjust employee schedules, but they can also instantly identify overtime exposure and make corrections.
  • Schedule the right person at the right time – With advanced scheduling software, supervisors can conveniently view employee profiles to schedule employees based on their qualifications to minimize costs, overtime exposure and ensure the right people are on the task.
  • Track employee hours to the minute – Employees are only human, which means they arrive late, leave early and likely take longer breaks than allowed. With an automated time clock, employers can minimize the cost of punch rounding and poor habits, which often results in thousands in saved labor dollars each month.
  • Conveniently track time for remote employees – With the possibility of needing to record authorized hours worked by employees from home or in other remote scenarios to remain compliant, automated timekeeping can help. Whether it’s through a mobile app, phone call, or browser-based punch, a timesheet solution can enable employees to conveniently clock in virtually whenever and wherever they need to.
  • Stay in compliance – With the updated overtime guidelines, employers will need to ensure they remain compliant by properly implementing, tracking and reporting employee hours. Whether this is for employees on site, off site, working remotely or otherwise, there’s no better solution for this than automated timekeeping.

Prepare for Changes Coming December 1st

With the potential increase in overtime and labor forthcoming December 1st, 2016, employers should begin immediately to prepare by implementing the proper systems and practices to minimize the impact. Although the implementation of the new provisions will be unique for each employer, the need to better track employee hours and control increases in overtime and labor costs is universal.

Contact 941 Timekeeping to learn how today’s workforce management technology can help you accurately manage your labor costs.

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