As the clock ticks toward the announcement of final overtime rules, employers will be asking what they can do to get ahead of the curve.
The answer? Employers should put in place a proactive preparation and compliance plan so that they can successfully understand the latest government regulations.
FLSA preparation tips
• Employers should designate a team from HR, payroll, compensation and legal to dissect the details and learn what specific steps their organizations need to take. The more people who understand FLSA basics the better — it may not be rocket science, but it is close.
• Identify currently exempt positions or employees whose salaries are in the range between the old “white collar” threshold ($23,660) and the likely new threshold ($50,440). Employers may need to re-classify many of these employees as non-exempt and therefore overtime-pay eligible.
• Determine which of these positions will qualify for raises above the new threshold and which positions will be reclassified as non-exempt. Beware of the “rising tide effect” of salary increases on existing mid-level salaries and compensation costs, which can be steep. For instance, The Wall Street Journal reports that the University of California “faces a $39 million-a-year tab for raises to avoid paying overtime …”
• Review hours worked by employees re-classified as non-exempt to be able to model compensation impacts of projected overtime costs.
• Evaluate options for upgrades to human capital management technology systems and for changes in job duties, scheduling, staffing and work assignments to better control unplanned overtime.
• Develop a communications strategy for employees and a training plan for managers on the new federal rules starting with why the U.S. government has required such striking changes in overtime eligibility. It’s important for all employees, executives included, to understand that the federal government has mandated these changes nationwide out of a concern that the 2004 regulations are outdated. Special attention may need to be given as to why employees reclassified as non-exempt, because of the new federal rules, may be designated as hourly workers.
FLSA compliance tips
With the help of Employers legal counsel and expert team, they should outline specific compliance scenarios for employees reclassified as non-exempt and therefore eligible for overtime pay under the new rules, which could include:
• Implementing restrictive overtime policies as needed to control overall compensation costs. Many organizations are already planning to do so. In fact, SHRM reports that 70% of respondents in its 2015 Overtime Regulations Survey said they would implement restrictive overtime policies as a result of the new rules.
• Adjusting schedules where possible to minimize overtime costs, including adopting innovative strategies and technology to maximize scheduling productivity. Human capital management technology can provide a means to improving time and attendance and scheduling efficiency.
• Shifting certain overtime work now performed by newly non-exempt employees to overtime-exempt employees, part-timers, temporary workers and contractors, if possible.
• Where feasible, hiring more people to limit overtime hours for employees reclassified as non-exempt.
If possible, reducing hourly rates of new hires expected to work overtime to maintain level total compensation costs for these positions.
The last major change to Fair Labor Standards Act rules for classifying employees as overtime exempt or non-exempt was in 2004, and that change was far less dramatic. Many front-line managers and employees have never dealt with such disruptive federal regulations.