The recent ruling by the US Department of Labor to increase the FLSA salary overtime threshold from $23,600 to $47,476 (from $455 to $913 per week) is anticipated to impact 4.2 million workers. Needless to say, the new ruling will have a tremendous impact on thousands of employers nationwide and has created a great deal of recent debate and discussion as the change is scheduled to take effect on December 1st.
In many cases, employee wages are already an employer’s greatest expense, so a likely increase in overall labor costs or decrease in production as employees become eligible for overtime pay is something employers must begin to prepare for immediately. Central to this discussion is how employers will administer and track changes that occur, and how to minimize the potential increase in cost.
Employer Preparation & Considerations
For employers with employees under the $47,476 threshold the most important question to be asking is how to prepare. To help, here’s a brief list of seven considerations and how an automated timesheet and scheduling system can play a role in those decisions.
- Raise salaries or re-classify as hourly? – For employees under the threshold, employers will have a difficult decision to make. Perhaps a small increase in pay is acceptable for employees near the threshold in order to minimize change to employee hours and production. For others, however, re-classification may be the only option. Consider then how much overtime will be authorized for these employees? What then will become the appropriate “regular” hourly pay rate and associated 1.5x “overtime” rate? Once decided, with automated timekeeping, these calculations can be automatically made or even blended if differing pay rates apply.
- Accurately, conveniently tracking hours and overtime – If you don’t already have an accurate and automated way to track employee hours to the minute, now is without question the time to prepare in order to remain compliant and not become over-burdened by employee scheduling, time tracking and administration. Today’s technology tools make this task very affordable and convenient. Whether you take advantage of time clocks, online scheduling software, mobile app technology or countless additional features, an online timesheet solution will make life drastically easier to manage for HR, supervisors and employees.
- Should equal overtime hours be authorized? For employees who are accustomed to working 55-60 hours per week but will now be re-classified, will those employees be authorized for 15-20 hours of overtime pay every week? If not, who will make up the hours of company production? Will salaried employees pick up the extra work or will part-time employees pick up additional hours? If part-time employees will absorb the work, automated timekeeping and scheduling software can help you quickly schedule hours in advance to increase control, track actual hours worked, see alerts for exceeding hour limits, and also limit the risk of part-timers going over 30 hours per week, which can be critical for benefit eligibility under the Affordable Care Act (for Applicable Large Employers).
- What will the new regular rate of pay be? For re-classified employees, employers must now determine a new hourly rate while taking into consideration how many hours of regular overtime will be authorized at 1.5x pay. If multiple pay rates apply due to differing job functions or shift premiums, automated timekeeping can be used to automatically apply those pay policies while conveniently calculating the associated overtime rates. Finally, if overtime pay will be a significant part of the employee’s pay but will vary each week, the employee’s financial wellness must be taken into consideration.
- How will employers absorb the potential increase in cost? Whether it’s the increase in salaries, overtime hours or administrative time, employers are likely to see an increase in labor wages starting December 1st. The alternative is a decrease in production. However, with an automated timesheet solution, employers can maximize productivity while ensuring the cost is minimized. This is generally accomplished by managing hours in advance, paying employees to the minute based on actual time worked, and effectively minimizing overtime through better visibility. In the end, there is no better way to control labor costs than to implement an automated time and labor (scheduling) solution.
- Compliance – Observance of wage and hour guidelines is becoming increasingly more challenging and important for employers. To minimize your risk of a possible violation, audit or Department of Labor investigation, use an automated time card calculator to demonstrate accurate and consistent application of tracking and pay policies.
- Track remote workers – If you have employees working remotely or in the field who will become eligible for overtime, you’ll need to establish both tracking and policies for accurate pay of these individuals. We recommend the use of browser-based clock or a mobile app that supports GPS pinpoint location verification. Another option is a telephone-based method allowing employees to clock in/out over the phone. These tools will reduce countless hours of poor time tracking, overpaid hours, inflated overtime and more.
Time is often considered your most valuable resource as an organization. Maximizing your staff’s time while minimizing the expense is one of the most important things you can do as an employer. Contact 941 Timekeeping for more information on preparing for the new FLSA salary overtime guidelines in December 2016.