May 5, 2016 8:30:00 AM / by John Duval
The Department of Labor’s proposed FLSA changes could change exemptions for as many as 5 million white collar workers in the US.
It’s been a long road since President Obama first gave the memorandum to modernize the labor wages and overtime pay—something that hadn’t seen any prior change in over a decade. After receiving submissions from employers last summer, the DOL drafted up a final rule proposal. In Mid-March, they handed it over to the Office of Management & Budget for review. From that point, it could be anywhere from 30-90 days before we hear of any official changes.
How to prepare your business for the FLSA proposed changes
With the FLSA proposed changes on the horizon, here are some ways you can prepare your business:
Review FLSA classification of employees.
Before we go any further in preparing for the FLSA changes, employers and HR professionals need to know how to classify employees.
Is this employee full-time temporary or an independent contractor? Do they have exempt or non-exempt status? While some classifications may seem obvious, little nuances can make a big difference (and lead to big penalties). Learn more about classifying employees.
If you’re unsure if an employee is covered by the FLSA, consider the salary base test, salary level test, and duties test.
Salary level test: Employees who receive an annual salary of at least $23,600 per year ($455 per week) are exempt. The FLSA proposed changes will increase the salary level test to $50, 440 per year ($970 per week).
Salary base test: Employees are paid on a salary basis if they receive a “guaranteed minimum” amount of money per week for work performed and count on receiving pay. In most cases, this qualifies as exempt.
Duties Test: If an employee meets both the salary level and salary base test, the employee is exempt if they perform exempt job duties, or high-level work as identified by the Department of Labor and the FLSA.
This is only a quick overview of the FLSA coverage tests. Learn more in-depth information to help determine non-exempt or exempt status.
Know the difference between federal and state regulations.
States may enact regulations that differ from the federal regulations. It’s important to know the regulations in your state. How do you determine whether to follow state or federal overtime regulations? You must follow whatever regulation sets directives that are most generous to your employees. Learn more about labor laws in your state.
Identify which employees the FLSA proposed changes may affect.
Make a list of employees whose current annual salaries would place them under the proposed threshold and change their FLSA status.
You may need to conduct a job duties review. Verify job descriptions with employees to determine if job descriptions reflect exempt or non-exempt duties.
Calculate and monitor employee hours.
To manage costs of non-exempt employees and avoid FLSA non compliance, you need insights into the hours each employee is working. Manage labor costs with reliable time & attendance and scheduling systems to help track overtime and receive notifications when employees are approaching overtime hours.
Any unscheduled or off-the-clock work must be reported and compensated. Implement policies that prohibit off-the-clock work and review that all on-call policies are compliant with the FLSA.
Budget for the changes.
Plan ahead for any changes in labor costs due to the FLSA proposed changes. If you have a lot of employees who will change to non-exempt status after the FLSA changes in 2016, you need to be ready to pay.
Calculate the most cost-effective way to pay overtime hours. This could include raising the salaries of your employees who often work overtime hours, depending on cost. Calculate the current salary plus overtime pay and compare it to the increased salary (even if just above the threshold).
What other changes could be more cost-effective than paying frequent overtime for employees? It may be worth hiring another employee or contracting out workers to take on the load. Find what’s right for your business.
Get the right resources.
Get the right resources to manage FLSA changes to overtime rules. Download the Guide to FLSA Status and Changes to Overtime Rules.
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