The New Overtime Rules are Here. Now What?

June 15, 2016

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Most business owners are likely now aware of the U.S Department of Labor’s rule change that makes an estimated 4.2 million American workers, who are currently salaried, eligible for overtime pay.

Until now, what are known as white collar employees (hence the ruling’s white collar overtime nickname) were required to receive overtime pay if they made less than $455 per week, or $23,660 a year. However, when the new FLSA rule goes into effect on December 1, 2016, that salary threshold will more than double to $913 per week, or $47,476 annually. The new rule also provides guidelines for determining future adjustments to the minimum salary requirement, which are to be conducted every three years.

With only a few months to prepare, business owners may wonder what they can do to ensure the rule change does not result in any unnecessary or damaging surprises to them or their employees. Here are a few ways companies can retain control of their expenses when the new rule goes into effect:

Analyze the impact before December 1

Business owners should fully understand how their company will be affected long before the new FLSA rule is implemented. They should focus on how many employees will be affected, what their job duties are, and how the company plans to address the new rule for each impacted position. That may mean adjusting salaries or job duties of those affected to fit the new guidelines.

Consider investing in time management software

Newly nonexempt employees will need to closely account for their time to ensure they are correctly compensated for overtime hours. Investing in a robust hourly tracking system that allows workers to clock in and out from their desktop or mobile devices can ease their transition as they become familiar with the new process. For instance, Insperity’s TimeStar® tracking software helps automate both timekeeping and scheduling tasks to keep employees accountable for everyday accuracy and dependability.

Check existing company overtime guidelines

Now is also a good time to revisit company policies regarding overtime work. For example, are employees required to obtain written permission from an authorized supervisor prior to working overtime hours? If not, businesses should institute new policies to better track and control overtime costs before they are incurred. That said, while requiring permission to work overtime is a valid policy, if an employee works extended hours and the employer knew or should have known (or, as the FLSA says, “suffers or permits an employee to work”), overtime rates must still be paid (although the employee may be disciplined for not following the policy). Implement new checks and balances in advance of December 1 so employees are familiar with the new approval processes. These systems should also make certain costs are being accurately managed prior to the start date of the new rule.

Communicate

The new overtime regulations have made headlines across the country, so it is likely the affected employees are at least vaguely aware of what is to come. As soon as a company has identified who among their employees will be reclassified as nonexempt, they should proactively communicate with the worker and his or her supervisor about what to expect in terms of policy or duty changes.

Revisit salaries

It may make sense in some cases to adjust salaries for employees near the threshold. A small increase in salary may save major headaches in timekeeping complexities created by the new ruling. However, employers should know a salary increase alone does not guarantee an employee is exempt from overtime, because there are also “duties tests” that must be met for an exemption to apply. An Insperity Certified Business Performance Advisor can help explain these tests in greater detail.

While the new overtime ruling will likely impact the policies of many small and medium- sized businesses across the country, management should seize the opportunity to review and refine their internal overtime policies in advance of the December 1 implementation. Combined with some position adjustments and software improvements, the transition can be smooth and benefit both workers and the company as a whole.

Eric Bonugli is a district manager and Kay Oder is a Certified Business Performance Advisor for Insperity located in the company’s Austin office. Insperity, a trusted advisor to America’s best businesses for more than 30 years, provides an array of human resources and business solutions designed to help improve business performance.

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Topics: Human Resources

Kay Oder

Insperity

Kay Oder has owned six companies, has been a resource to thousands to businesses and brought solutions to help business owners minimize risk, improve business performance and navigate today’s highly regulated and complex “business of being an employer”.

Today, Kay uses the insights gained throughout her career as a speaker, business owner and business advisor. Audiences enjoy her candid, informed perspective on HR related topics as well as her razor-sharp southern wit.

Kay is also a Certified Business Performance Advisor with Insperity, the $2.6 billion business performance solutions provider she has called home since 1993. Kay has consistently been among the company’s top producers during her 20 plus years with the organization, earning Insperity’s highest honors, including the Top Volume, Circle of Excellence and the Chairman’s Club awards.

Prior to Insperity, Kay was the President and Co-founder of Texas Valve Specialists, a supplier in the oil and gas industry. She has also owned companies in the construction, demolition, machining and promotional apparel arenas. She spent four years as a client of Insperity and upon selling her last venture, joined the Insperity team.

From an early age Kay demonstrated an entrepreneurial spirit, beginning at age six when she sold cantaloupes from her parents’ front yard, which she offered three for fifty-cents, with a free puppy.

Kay and her husband, Dale, relocated to Austin from the Houston area in 1996 when a theft occurred in their family: their granddaughter was born and stole their hearts, so they had to follow.

Insperity, a trusted advisor to America’s best businesses for more than 30 years, provides an array of human resources and business solutions designed to help improve business performance. Insperity® Business Performance Advisors offer the most comprehensive suite of products and services available in the marketplace. Insperity delivers administrative relief, better benefits, reduced liabilities and a systematic way to improve productivity through its premier Workforce Optimization® solution. Additional company offerings include Human Capital Management, Payroll Services, Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Financial Services, Expense Management, Retirement Services and Insurance Services. Insperity business performance solutions support more than 100,000 businesses with over 2 million employees. With 2016 revenues of $2.9 billion, Insperity operates in 61 offices throughout the United States. For more information, call 800-465-3800 or visit www.insperity.com.

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