The FLSA overtime rule is about to change the way you do business.
The Department of Labor (DOL) has proposed changes to the Fair Labor Standards Act (FLSA), changes that will affect a substantial number of Americans, business owners and employees.
The proposed change works like this: several million Americans workers who are not currently eligible will instantly qualify for overtime compensation. And that can have a dramatic impact on how businesses will operate.
Currently, FLSA overtime rule declares salaried employees earning more than $455 weekly (or $23,600 annually) as overtime exempt. These employees are not eligible to receive overtime compensation. But that will all change on December 1, 2016, when the FLSA raises the exemption limit from $455 weekly to $913 (the annual exemption jumps to $47,476), more than double the current threshold.
The proposed change also means that beginning December 2, 2016, more than 4 million employees who are currently exempt from overtime because their salary is more than $455 weekly, will now require time-and-a-half payment if they work more than 40 hours. If their annual salary is more than the new threshold of $47,476, however, they remain overtime exempt.
And it’s not a one-time-only increase. The Department of Labor has announced its plans to increase the salary threshold every three years.
It’s important to note that the proposed changes only affect salaried employees, not employees paid hourly.
Higher Education and Not-For-Profit Impact
Many higher education institutions and not-for-profit organizations employ salaried staff, instead of hourly wage. The fear, now, is that many higher education and not-for-profit establishments will be forced to reduce or eliminate positions because they can’t, or won’t, pay the mandated overtime.
Moving Forward With The FLSA Overtime Rule
HR departments need to evaluate each job and determine whether or not it will be exempt from overtime compensation requirements. If a job is not exempt, then a game plan on how to approach the overtime issue must be drawn up well in advance.
Just like any other anticipated change within your business, a well-defined, comprehensive communication plan is a must to maintain productivity levels and ease employee anxiety levels. Now is the ideal time to define a communication method you will use during the implementation of new FLSA overtime rule.
Once you know which positions are non-exempt, you can begin exploring options to deal with the overtime issue, including:
- Converting staff to hourly wages (salary ÷ 40 hours) rather than salary;
- Consider increasing the salary to maintain overtime exempt status;
- Use actual hours worked instead of salary;
- Switch to fluctuating work, i.e. ‘salary’ means total hours an employee works – including any overtime hours.
- What You Can Do Today
For any employee that will be reclassified, employers should consider:
- How many hours an employee typically works each week and what tasks they routinely perform;
- Can any job functions be absorbed by staff or other departments, or be eliminated entirely;
- Whether the entirety of an employee’s tasks to be outsourced altogether.
Are you ready for the December 1st deadline? Could you benefit from staffing experts who can help you get ahead of the overtime issue? Let the team at Top Notch Personnel help you master the proposed new FLSA overtime rule