Did you know: 46 million previously exempt employees may be eligible for overtime this year thanks to the recently proposed overtime rules? This legislation has the potential to affect thousands of businesses, including yours.

So how can you ensure that you’re staying compliant? The following strategies will get you on the right track. 

Background

The Fair Labor Standards Act (FLSA) includes overtime pay protections and a guaranteed minimum wage. The FLSA does have a number of exclusions, including white collar and highly compensated employee (HCE) exemptions.

A white collar worker includes executive, administrative, professional, outside sales and computer employees. In early July of last year, the Department of Labor (DOL) proposed a rule update that revises these regulations and increases the minimum salary level of those exempt. In fact, the DOL is looking to increase the minimum salary level for white collar exemptions by more than double.

Further Explanation

Employees who had previously been labeled as exempt because of the duties performed (managing two or more employees, etc.) will now have to be reclassified to non-exempt if they do not meet the salary requirements.

Think about someone who manages a gas station and makes $35,000 a year. This individual has been working hours in the “whatever it takes” range for the last few years. Now, that same individual will only be able to work 40 hours a week, and anything above that will be paid out at time and a half.

This will require some pretty heavy recordkeeping efforts in order to manage the hours for these employees and to pay them the overtime premium in excess of 40 in a week.

The easiest way to smoothly track hours would be to have those former exempt employees clock in and out like the other employees they manage. Then, an automated timekeeping system will automatically calculate the overtime each week when the employee exceeds the overtime threshold. This will allow the employer to better manage employees and avoid paying excessive overtime.

Strategies You Can Implement Today

Communications: Work with your HR personnel or other management to make sure that all employees are classified correctly. Even though some may pass tests for exempt status, the minimum wage rule will trump all other tests. No matter what they do, if they do not pass the wage test they are no longer exempt. All of your management team will have to be aware that these employees are no longer exempt and to schedule accordingly.

In addition, you will need to communicate the company policies regarding recording time in and out, required meal breaks, and any rules requiring prior approval of overtime hours worked, to the affected employees.

Staffing: Since these employees will no longer be able to work the hours they worked before, there may be lost productivity as a result. There might be a need to promote other employees into similar positions so there is adequate supervision which, in turn, could create the need to bring in other entry level employees to fill the void of the promotions.

Automated time and attendance and scheduling tools: These tools will assist in making sure that your company is not accidentally scheduling your employees into overtime positions. It will also automatically calculate the overtime for your employees ensuring that whenever overtime does happen, you’ll be in compliance.

Other added benefits of a time and attendance system:

Assistance with ACA compliance - As more employees will have their hours recorded on a weekly basis, you’ll get a more accurate record of full-time equivalents.

Mandatory Sick Leave laws – Ensure compliance with the new mandatory Sick Leave laws by accurately calculating the legal required sick leave accrual per hour worked. 

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