The U.S. Department of Labor (DOL) released a rule taking effect Dec. 1, 2016 regarding overtime wage payments that could impact more than 4 million workers across the country. The new rule will more than double the salary threshold that employees must meet in order to qualify for an overtime wage payment exemption.
What are the implications to you as an employer?
- The salary level increase to $47,476 per year for white collar exemption qualification may influence your company's bottom line.
- Time and resources you dedicate to reviewing employees' exempt status, updating overtime policies, notifying employees of changes and adjusting payroll systems.
- Potential administrative and payroll expense increases.
- Penalties for noncompliance in 2017 and beyond.
How will you adapt?
Many business owners mistakenly believe the only way to comply with the new overtime regulations when they have white-collar employees who earn less than $47,476 per year is to change their status from salaried to hourly employees. But you have other options:
- Raise salaries and keep them exempt. You could raise the salaries of exempt employees up to or beyond the salary level to maintain their exempt status, as long as those employees meet the duties test (as an executive, administrative or professional employee). This may be a good option for employees who have salaries close to the new salary level and regularly work overtime.
- Pay overtime plus the employee’s current salary. For your newly overtime-eligible employees, you can continue to pay them the same salary, and pay them overtime whenever they work more than 40 hours in a week. This option works for employees who typically work 40 hours or fewer in a week, but occasionally require overtime. Remember, you’re not required to convert employees from salaried to hourly to calculate overtime
- Shuffle hours and workloads: You could hire additional workers to ensure that workload distribution, time and staffing levels are all managed appropriately for your white-collar employees who earn below the salary threshold.
The new overtime rules mean another Texas-sized helping of compliance issues for employers, and for many businesses, the changes will significantly impact the way they schedule and compensate their workers.
What should you and your HR team to do to prepare?
- Learn what you’re up against. Carefully study the new rule and use the resources below to guide you.
- Check your systems for compliance. Make sure your time tracking and pay reporting systems are compliant. If they’re not, it’s time to upgrade.
- Separate exempt from nonexempt activities. Review your employees’ job positions to determine what kind of work is performed and expected of them, measuring how much time they devote to overtime-exempt activities.
- Audit your payroll. Review your payment records and determine which exempt employees are affected by the new rules.
- Develop a ROI-focused plan for compliance. Work with your management team to minimize costs and violations, and assess whether to increase salaries to meet the new exemption threshold, alter job duties or start paying workers overtime.
Download these guides and calculators to understand the changes and determine what steps are necessary to remain compliant.
For help keeping your Texas business compliant with changing wage and hour laws, contact the business insurance and HR compliance experts at Higginbotham.
Note: This post was originally published in July 2016 and updated for accuracy and comprehensiveness in November 2016.