When the Department of Labor changed Part 541, governing overtime exemptions under the Fair Labor Standards Act, the new regulations touched almost every organization in the country. Here are the basics:
- Salary threshold changed to $913/week ($47,476 per year)
- Automatic salary threshold increases every three years (not annually) to maintain level at 40th percentile
- The duties test remains unchanged
- Effective date is December 1, 2016
- Highly compensated employee (HCE) exemption is now $134,000 per year
What does this mean for your organization? It is estimated that 35% of full-time salaried workers are expected to fall below the threshold under the new rule.
For employers desperately seeking sustainable worker costs, the new overtime rules will force some hard choices. For example, do you keep one employee at two wages (regular and overtime) or two employees at one wage (regular with no overtime)? There are hidden pitfalls to both scenarios.
If you have a salaried employee whose 40 hour/week hourly rate works out to $20 and an overtime pay of $30 and you want them to work 80 hours, that works out to $2,000 a week. If you hire two people at $20 to work those same 80 hours, you have to pay $1,600. That means you save $400. So hiring the second person is a no-brainer, right?
Two workers job sharing: This model can work in some specific blue-color professions like factory work, where hand-off transitions are relatively straightforward. Unfortunately, most of today’s workforce is more knowledge-based, so splitting a job between two people can have a serious impact on productivity.
To effectively job share you need to put systems in place that will:
- Schedule easily: The most cited benefit of job-sharing is that it allows workers (many of whom are sandwiched between caring for both their parents and their children) to be more responsive to their family’s needs. In order to make this happen for both workers and management, you need to have a system where workers can schedule themselves on the fly in a way that is transparent, easy and controllable.
- Provide visibility of projects in real time: Many organizations use cloud-based secure systems to keep everyone on the same page so that hand-offs happen with minimal discontinuity.
- Create clear lines of accountability for each project and task. Working with an HR consultant can help set up these systems in a way that works best for your organization.
- Track workers’ hours effortlessly: Double the workers doesn’t necessitate a doubling of administration. You can get systems that will allow you to scale the size of your workforce while empowering your HR team to maximize economies of scale to more easily manage your workforce from a single dashboard.
Payday HCM uses TimeSimplicity, an automated tool that manages the difficult challenges of team scheduling with ease. This cloud-based software streamlines the scheduling process so effectively that shifts are never left uncovered, employees are empowered to manage their own time, and you don’t have to start from scratch every week. In short, Payday HCM helps you minimize confusion and maximize profit. Check out the video below:
In order to navigate this potentially emotional minefield, you need to deploy a system that allows workers to track their hours on the go without having to literally line up in a single location to clock in/out. You can make it as painless as logging into your computer, following voice prompts on your phone, or simply logging into your mobile device.
For management facing a 50% increase in hourly overtime costs, controlling when, where, and how much your salaried workforce does their jobs suddenly becomes mission critical. Payday HCM uses TimeWorksPlus to help organizations easily take change of their labor and time management.
Payday HCM scheduling, and time and attendance programs offer flexibility with efficient and accurate payroll preparation. Using Payday HCM’s technology will help employers:
- Cut and control labor costs
- Reduce clerical errors
- Increase employee accountability
- Improve overall employer compliance
Payday HCM’s best-in-class products easily and accurately streamline your time labor management.
The next steps you should take are to:
- Identify which exempt employees could be affected.
- Calculate the hours worked by affected exempt employees (you may have to ask them to track hours for a time).
- Consider which compensation strategy is the most appropriate.
- Conduct a compensation analysis for each employee.
For more guidance, please contact Payday HCM’s HR Consultants (1-888-2PAYDAY) for assistance with navigating your way through the new rule.