4 Things Your Business Must Consider to Prepare for the New Overtime Rules

To understand what’s happening, let’s first look at the current scenario: the salary requirement for an employee to be exempt from overtime is a minimum of $455 per week. There are other requirements, but this is the main one that’s being changed. The DOL’s new salary increase for exempt employees is now $913 per week, or $47,476 annually and will automatically increase every three years. Certainly, this change will impact many mid-level managers and even higher-level managers in some economic regions.

Here are four things to consider that will help you prepare for the new rules.

1) Keep track of time records.

If you aren’t keeping track of time records for everyone, you should be! Many employers frequently keep track of hourly employee time, but neglect to track salary or exempt-level employees.

Many employers have been burned in the past by an employee that works overtime, but doesn’t expect to be paid—only later to face the same employee at a wage-and-hour hearing, and end up paying wages and penalties, as well as subjecting your entire workforce to an audit! If you don’t keep records, you basically give any employee a blank slate to say that he or she worked whatever they want to claim. If you can’t prove otherwise, then the employee wins!

You don’t need retina scanning or DNA time clocks to keep records. No, something even as simple as a pen and paper timesheet is sufficient to protect your business. The key is to ensure that you keep these records and pay overtime if it is due.

2) Cut the connection.

Many employees are wired in to their jobs 24/7 through email and text, and now this can cost you. Logging into the network from home to fix an issue at 8 pm sounds like a great idea from a dedicated employee. But is it worth paying them time and a half to fix something that could realistically wait until tomorrow? Most email systems and servers can be configured to require that you give authorization before the work email may be added to a phone, and that may be something you now need to re-evaluate.

3) Update your job descriptions.

Some employers are making plans to deal with the new rules by splitting up positions. In other words, they are considering turning one full-time, 50-hour exempt manager position into two part-time managers. I expect that more companies will make difficult decisions like these in order to comply with the changes. It’s wise to start planning now for how your business can adapt jobs to be better prepared in protecting your bottom line.

4) Give a raise.

You might have some managers that are just under the threshold of the new amount. And so, you could consider increasing their salary just enough to avoid the potential for paying overtime. But remember, salary is not the only rule for someone being paid overtime, so make sure that they still meet the other requirements. I’d be happy to advise you on some of the other details of which you might need to be aware. Nonetheless, if you have an employee who meets the requirements and consistently works more than 40 hours, it might be more cost effective to increase the salary, and thus, avoid paying overtime.
Prepare Now to Adapt

These new regulations go into effect December 1, 2016 and undoubtedly, this ruling will impact many industries. But there are some that will feel the greater brunt of this due to having a larger force of front-line management, such as healthcare, retail, hospitality, food service, and manufacturing industries. Most business owners who have been in business for any period of time have learned to adapt to other changes and this is nothing different. Some will make business decisions to adjust work schedules and pay, while others will absorb the additional costs and raise their prices accordingly.

Certainly, these changes may also increase the functions that a company would consider outsourcing. A task-focused service company, such as a professional employer organization like Payday, is also worth considering in order to alleviate the burden of overtime compliance.

Whatever path your business plans to take, the time to begin to plan is now. And again, know that Payday HR and myself are here to help. Call us at 1-866-928-7450 or email info@paydayhr.com to discuss how we can help you plan for these changes.