On Dec 1, 2016, the Department of Labor’s (“DOL”) new Fair Labor Standards Act (“FLSA”) overtime regulations will go into effect. These new regulations double the minimum salary for employees to qualify for white collar overtime exemption from $23,660 annually ($455 weekly) to $47,476 annually ($913 weekly). These changes are expected to directly affect 4.2 million workers.
The implementation of this new salary threshold requires that all employers to take a critical look at exemptions and compensation budgets. To prepare for the implementation of these rules, Snelling recommends the following:
- Identify currently exempt employees who earn less than $47,476, since these are the people that will be directly affected by the changes.
- Estimate how much overtime those employees currently work.
- Analyze your budget to help assess your compensation options and implement changes, which will be presented below.
Employers have a number of options regarding employees that are newly eligible for overtime pay including:
- Determine whether you are going to increase the annual salary to $47,476 or change the employee to an hourly non-exempt position. Before, you make your decision, note that 10% of the annual salary ($4747.60) can be commission/incentive pay. So if the employee is paid a commission, the minimum base annual salary must be $42,730. NOTE: Commission must be paid in regular installments and at least quarterly. Each time a commission payment is made the employer must calculate if the employee is still on track to earn the annual rate of $47,476. Commission cannot be made up at the end of the year.
- Pay an overtime premium for overtime hours worked.
- Hire extra workers to reduce or eliminate overtime hours.
- Restructure the workforce to transfer duties from newly nonexempt workers to exempt workers.
- Consider the overtime restrictions and explore ways to track nonexempt workers’ hours.
- Determine whether to change or implement policies regarding telecommuting and mobile device usage to curtail overtime.
- Designate one person to take after-hours phone calls from clients and employees.
- Work with a reputable staffing firm that can locate the skilled contingent workers that you need to eliminate the need for overtime.
Every employer subject to the FLSA should be analyzing the potential impact of the new regulations on their organization, implementing a plan to ensure compliance prior to the December 1st deadline, and then develop a communication plan regarding these change. These are big changes. Millions of (mostly) white-collar workers are now facing the prospect of gaining overtime protection….most of them women with children… and they need to fully understand these changes.
Just remember, Snelling is here. We know your market; we know the job pool, and we can find you the temporary workers you need. We have been working with clients to make these changes and lower their overtime burden. We can help you with a strategy that will set you and your employees onto a path for success. So, if you have questions, contact us today.