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Overtime Laws: What Businesses Need To Know

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Overtime Laws: What Businesses Need To KnowThis is the first time since 2004 that the Department of Labor has updated the overtime regulation policies.

Initially, the new rules were going to be in effect in late 2016, but it looks like businesses have more time to prepare as the date has been pushed back until 2017. 

There are some changes to the proposed rules that are still unclear; however, there are important updates that businesses should be aware of.

4 Things Businesses Should Know About The Overtime Laws

It’s estimated that 5 million current exempt workers would now become eligible for overtime pay. The only way to avoid the overtime payment would be to increase the salary of those employees.

This would potentially be a huge adjustment for small businesses. They would most likely need to update their compensation plans to be in compliance with the new laws. 

What We Know About The Overtime Laws:

  • There will be a significant rise in the minimum salary threshold. Currently the threshold a worker must hit to be overtime exempt is $455/week or $23,660 annually. The proposed regulations are looking to increase that to $970/week or $50,440 annually.
  • Once the new regulations take effect, the minimum threshold will increase automatically, for the FIRST time ever! This automatic escalator will keep pace with inflation while eliminating the need for a new law every time the lawmakers want to increase it.
  • As far as duties tests go, there have not been any suggested changes yet; however, they are looking for feedback and comments from employers on whether or not they are working to weed out employees who are not bona fide white collar exempt.
  • The agency will be increasing the total annual compensation required to exempt highly compensated employees from $100,000 annually to $122,148 annually.

How To Plan For Compensation Compliance

Employers should begin to budget and plan accordingly. Below are some ways to prepare for the changes.

  • Conduct a self-audit to determine what changes you may need to make to employee classifications
  • Evaluate your staff and determine which employees need a salary increase to the new minimum threshold
  • Begin to reclassify employees as non-exempt and see that they will not need to work overtime
  • Properly manage and monitor employee hours and use appropriate tools to help make educated staffing decisions
  • Consider using automated systems such as time and attendance systems

Aside from having to review your employees and their compensation, it’s important to have a plan in place to communicate to your staff the changes that are going to be made.

Employees need to be made aware ahead of time so they aren’t caught off guard, making more of a disruption in the workplace.

Benefits Of A Flexible Workplace

Most businesses are extremely concerned and worried about the impending changes to the overtime wage laws. It can cost them a lot of money in overtime expenses as well as increases in salaries. 

Employees are equally as concerned because if employers are faced with overtime charges, employees might lose out on some of the perks that they enjoy such as working remotely, or working during unconventional hours.

However, keeping a flexible work schedule in your workplace can be beneficial. Of course the obvious reason employees enjoy the benefits of working remotely is the major flexibility their day has. Although work needs to be completed, you’re able to structure your day to get the work done when it best suits you.

There are benefits to employers as well. Working from home or at a remote location has been linked to less stress in the workplace. Employees enjoy better well-being and overall health, and employee absenteeism costs decrease.

How does this benefit overtime laws?

Employers should look into how they can stay compliant with hourly wage and salary compensation, but still offer flexible work schedules. 

Lower wage workers are just as likely as white-collar workers to value the availability of flexible work when looking for a new job, and many hourly workers have jobs well-suited to flexible arrangements.

What Can Still Change

Although businesses need to prepare for the changes to come, there is a curveball that can be thrown our way.

There’s an upcoming Presidential election. The DOL has proposed deadlines for the updated changes, and has pushed them back before.

With the changes set to be in effect for 2017, it’s pretty close to the Presidential election.

Would the Obama administration really issue a highly controversial set of finalized rules just prior to the election?

Overtime Laws: Businesses Should Stay Updated

The Department of Labor is quietly making some major changes in their overtime regulations! Although they have not yet published the new rules, or stated a date in which they will do so, their proposal was enough to get employers talking.

With the proposed changes, and complexity of their proposed regulations, it is important to stay up to date, and implement them immediately.

Overtime Law White Paper

Free White Paper: Employee Overtime Laws

This is the first time since 2004 that the DOL has updated the overtime regulation policies. Download your free white paper to learn what businesses need to know.

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