We are only eight short weeks away from the changes in the new overtime regulations.
-For those of you who have not started to think about this…now is the time!
-For those of you thinking the election may change things…think again in 2017!
-For those of you hoping for a reprieve from Congress or State Legislators… don’t wait as this may not occur by the December 1st deadline.
The key message is to BE PROACTIVE as this is an important change that could affect your business. On Dec. 1, the federal annual salary threshold for employees exempt from overtime pay will double, increasing to $47,476 from $23,660. Employees who make less than the threshold must be paid time-and-a-half for any hours worked beyond the 40-hour workweek. If employers want workers earning below the threshold to remain exempt from overtime pay, they must bump these workers’ salaries to at least $47,476.
Many employers believe that this is only a compensation change but in reality there are other areas that must be considered:
– Communication; How are you going to communicate this change to employees. There may be a compensation change, a timekeeping change and a perception change. It feels “different” to be considered a nonexempt versus salaried employee. How are you going to handle this change? You must communicate well in advance and if reducing wages you need to give a number of pay periods to prepare for this shift.
– Job Descriptions; Do your position descriptions accurately reflect the roles that people are performing? Does the position have independent decision making and if so is it more appropriate to provide an increase in pay to the salary threshold versus changing status to nonexempt. If you do not have up to date descriptions, now is the time to update.
– Tracking hours; Does your payroll/timekeeping system provide employees the ability to track hours worked whether in the office, at home, etc. Exempt employees may work at home during evenings without recording time, but after changing to nonexempt status, all working time must be recorded. You may need to take steps to limit overtime so that you are not surprised as a result of extra time being worked by now nonexempt employees.
– Pay Compression; When you change a salaried employee to a nonexempt position you must consider the hourly rate relative to their subordinates. If the hourly rate is not much higher that their subordinates it may feel like a demotion, particularly if the employee loses other benefits as well. Further, if you regulate overtime the person may actually be earning less compensation.
– Recruiting; You need to be prepared that recruiting may become more challenging for positions affected by this new regulation. How are you going to communicate an hourly rate versus a salary? How are you going to communicate the need to track and report hours?
This change is more complicated than you might initially consider. Rely on outside support and counsel to help you make key decisions and prepare in advance for all aspects of the change that is coming.