December 1, 2016 will indicate a substantial shift in how all companies handle overtime payments. On this date, the U.S. Department of Labor Overtime Rule goes into effect.
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What is the Department of Labor overtime rule?
The rule raises the white collar exemption threshold for salaried employees under the Fair Labor Standards Act (FLSA). It’s meant to protect what the U.S. government perceives as a growing number of workers who work more hours than in a standard work week without being paid for them. The rule raises the salary threshold for overtime pay to $913 per week, or $47,476 annually — roughly double the current threshold of $455 a week, or $23,600 annually. The new law is expected to affect at least 4.2 million American employees.
The law also claims that the thresholds will be raised every 3 decades.
What does the last Department of Labor Overtime Rule mean for companies?
A greater exemption threshold significantly increases the amount of employees that are eligible for overtime pay, possibly creating financial challenges for retailers and restaurateurs. You might have to tighten your budget or correct staff to follow the rule.
The principle also affects business decisions related to hiring, benefits, and flexible work opportunities. You will need to consider three principal options: increasing wages to the higher threshold, reclassifying affected workers without restricting overtime, and reclassifying affected workers while prohibiting overtime without consent.
Each choice involves new costs for your company. Raising wages to the exemption threshold will mean incurring substantial increases in operating costs and reclassifying workers and requiring authorization for overtime can mean new administrative costs and, obviously, the cost of overtime pay if required.
Be cautious about reclassifying workers, however. If you try to classify an exempt employee as non-exempt today, it might raise a red flag with the employee that they should have been categorized as non-exempt all together and should have received overtime pay. Communicate changes carefully with your workers.
You’ll also have to estimate the tasks these employees are responsible for and if changes you employ will leave some aspects of your company failed.
What should I do to prepare my business for the Department of Labor Overtime Rule?
Begin by making certain you’ve got a good handle on the number of hours each employee works each week. You might not have a great idea of the number of hours your employees which are now exempt from overtime pay are working and the time it takes them to accomplish their present tasks.
Also, review your wage practices today to make sure when the law takes effect in December that all your employees are properly classified and your company is in compliance.
A time and attendance tracking solution, particularly one which integrates with the point of sale (POS) and payroll systems, may be handy to accurately track employee hours, in addition to offer you real time reports on how many hours your employees have worked.
It’s well worth the time to have your wage practices in order: As of December, companies which don’t comply could be investigated by the Department of Labor, in addition to open themselves to personal lawsuit, possibly including class action suits.
Take time to comprehend the law, seek specialist advice or legal counsel when needed to ensure that your wage practices are in order, and keep a close eye on labor hours and costs to make sure your business will stay profitable in light of those changes.