A Guide for Navigating the New Overtime Rules

Are you concerned about the new overtime rules as required in the US by the Federal Labor Standards Act (FLSA)? Perhaps you are worried about how this ruling will impact your business? Try not to panic. You are in the right place to learn in advance what to expect and how to create a plan of action for dealing with this change.

Here is a total guide for navigating the waters of the new overtime pay rules that go into effect on December 1, 2016.

Currently, FLSA mandates that all US employers pay eligible non-exempt (hourly paid) employees overtime when they work more than 40 hours in a work week. The overtime premium is one-and-a-half of the regular rate of pay. For example, of an eligible employee works 42 hours in one work week, he or she is entitled to 40 hours of pay at the regular rate, and 2 hours at 1.5 times the regular rate. This ruling applies to employees who are paid on a weekly, bi-weekly, or monthly basis. The same calculation is used to factor the overtime payment.

Why the new overtime law?

Under the brand new ruling, which happens at the end of 2016, the United States Department of Labor (DOL) has issued an extension of overtime protection for more employees. There is an increase in the salary threshold for certain exempt or salaried employees – such as white collar jobs, administrative jobs, and executive level jobs that were previously not paid overtime. This is to help cut down on hourly abuse of salaried workers, who typically work as many as 50 or more hours per work week. It also helps to offset the costs of paying overtime to hourly workers only, so that organizations can more responsibly handle their personnel budgets.

What are the new overtime provisions?

The new overtime provision that was announced on May 18, 2016 by the DOL, also being referred to as the “Final Rule”, virtually doubles the previous weekly salary eligibility limits of $455 to $913 ($23,660 per year to $47,476 per year). This means, a salaried employee previously earning $550 per week who was not eligible for overtime is now eligible. Under the FLSA, eligible employees fall under the executive, administrative, and professional white collar categories, that were previously ineligible for overtime premiums.

How could this impact my business?

Starting on December 1, 2016, organizations will be faced with increased payroll costs, and this includes the administrative costs of managing payroll and overtime processing.  The Final Rule seriously impacts companies that have had a large share of salaried employees, at the executive, administrative, and professional white collar variety. This impact will be felt by certain industries that employ these job types, such as schools, health care, restaurants, day care centers, retailers, and manufacturing plants. In addition, there will be expanded overtime reporting requirements, which will take up more time to process during pay cycles and quarterly and year-end reconciliations.

If your business employees more exempt employees who are earning more than $23,000 per year, but less than $47,476 per year; now is a good time to take a couple of actions now:

  • Replace salaried workers with either hourly or temporary staffing employees.

OR

  • Provide salary increases to top earning employees to take them over the $47,476 threshold.

A better option – outsourcing

There is another option for managing the new overtime rules at your organization. Choosing a trusted workforce management system provider to manage all the aspects of payroll and overtime updates can be a much more efficient and cost effective method. It can also reduce the risk of being unprepared for an audit, should any complaints arise from employees in the near future. While the overtime updates have not gone into effect yet (as of this article date), it is always better to explore your options well in advance to choose the right vendor.

The benefits of going with an outsourced workforce management system include:

  • An employee self-service system that enables all employees to take responsibility for their schedules
  • Centralized workforce management platform that combines best in practice scheduling and payroll tools
  • Easy access to real-time information on demand through a custom administrative panel and reporting
  • A mobile-accessible system that stores all relevant employee information in a secure location

Administrators who wish to streamline scheduling, payroll, and overtime functions can easily integrate a custom workforce management system into current processes, since there is virtually no down time. Most find it simple to track employee hours, update employee work statuses, and handle overtime guidelines. The best part is that the workforce management system updates automatically with payroll and overtime updates so administrators do not have to worry about programming or accounting errors.

It makes good business sense to handle the overtime updates with a customized workforce management system.


Opinions expressed in this article are those of the author and not of The HR Gazette or its team members.

Author: Tess C. Taylor, CPC, PHR, SHRM-CP

Tess C. Taylor, PHR, CPC, SHRM-CP; Founder of HR Knows and The HR Writer, is a seasoned human resources content developer and career coaching professional in New York. She is passionate about educating others about human resource topics and policies, and has been featured on About.com (Employee Benefits), BlogHer, Career Addict, Glass Ceiling, HR Magazine, PayScale Compensation Today, and US News Careers, among others.

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