Curb Overtime Costs Before FLSA Legislation Changes
As you know, the Department of Labor (DOL) has proposed changes to the Fair Labor Standards Act (FLSA) that will make more employees eligible for overtime pay. While the ruling has yet to be finalized, it’s coming. And the new rules, whatever form they take, may become effective as early as 2016.
The DOL estimates that, if its current proposal is finalized, more than 4.6 million additional workers will become entitled to overtime pay, costing employers an additional $239.6-$255.3 million per year.[i]
What will it cost your business? What can you do about it? There are proactive steps businesses can take now to minimize the impact on their bottom line.
- Make sure employees are properly classified under current FLSA law
Misclassifying employees’ exempt/non-exempt status is a common FLSA violation, and it’s only going to get worse. Experts recommend that businesses conduct self audits, consulting legal counsel as needed to correctly apply FLSA-mandated “duties tests.”
Similarly, businesses are urged to make sure employee job descriptions are detailed and up to date, since this is key to verifying classification.
- Identify employees who may be reclassified under proposed FLSA law
Under current law, employees are exempt from overtime regulations if they earn a minimum of $23,660 a year ($455 per week) and primarily perform executive, administrative, and professional duties.
Under proposed law, that salary threshold will increase to $50,440 a year ($970 per week). The DOL is also proposing to raise the “highly compensated employees” exemption from its current $100,000 to $122,148.
Employers can use payroll data to identify employees earning between $23,660-$50,440 who may be reclassified, as well as highly compensated employees.
- Track work hours for these employees and estimate potential overtime costs
Once employers know which employees may be affected, they can total potential overtime costs. Those with an automated time and attendance system can easily pull reports detailing these hours and use those numbers to calculate additional costs.
- Develop a strategy for managing/limiting potential overtime costs
Employers can employ a host of solutions to limit additional OT costs, from instituting a strict 40-hour workweek to redistributing workloads and staffing changes. Obviously, accurate budgeting and time tracking programs will be more important than ever to keep hours and costs under control.
In summary, although we don’t know exactly what changes the DOL will ultimately adopt, proactive employers are getting ready. Assess your situation, and start developing your game plan now.
Ask EPAY for Help Managing Overtime Costs
EPAY’s cloud-based time and attendance system helps control overtime and its associated costs. Our real-time tracking system provides immediate visibility into overtime activity, thanks to real-time flagging and reports. Our budgeting program allows employers to monitor budgeted and actual hours worked and even issues alerts when departments approach specific thresholds. In addition, managers can be notified in real-time via text or email when employee hours approach overtime. To learn more about managing overtime costs, contact us.