Under the Fair Labor Standards Act, approximately 5 million employees that are currently exempt will become eligible for overtime unless their salary is raised. The current exemptions that will be affected are the “white collar” and the “highly compensated employee” exemptions.
The proposed rules propose to increase the salary level for “white collar” exemptions from the current minimum $23,660.00 per year a year up to approximately $50,440.00 per year. The proposed rules impact the “highly compensated employee” exemptions by increasing the annual compensation level from $100,000.00 to $122,148.00. However, the “white collar” exemption likely has the potential to impact businesses the most. Here are five things businesses can start doing now to prepare (as taken from http://www.foxbusiness.com/politics/2016/04/18/as-new-overtime-rules-near-businesses-need-to-prepare.html)
1. Check State versus Federal Regulations
Each state may enact regulations that differ from federal regulations. Businesses will be subject to whichever set of directives is more generous to employees.
2. Classify Employees by Salary
Employees making over the threshold amount may be exempt from overtime if their job duties primarily involve executive, administrative or professional duties, as defined under the regulations. Make a list of the employees whose salaries do not exceed the threshold because they may be entitled to receive overtime once the changes are enacted.
3. Calculate Employee Hours
Identify exactly how many hours per week each employee works. If a previously exempt employee made $26,000 annually under the old rules, and actually worked 40 hours per week, then you can convert that salary into an hourly rate equal to their pay, or $12.50 per hour. Monitoring those employees’ work hours proactively with threshold reports and/or scheduling tools may help manage overtime costs or ensure that any work exceeding 40 hours per week is paid at the appropriate overtime rate.
4. Consider Changes to Salaries
Consider a different strategy for employees who make less than the proposed salary threshold, who were previously exempt from overtime and who typically work more than 40 hours per week. You could raise these employees’ base salaries to at least the exemption threshold. To determine if this is a more cost-effective approach, calculate the increased salary and compare it to the estimated overtime costs that would otherwise apply.
5. Monitor Overtime
Examine the ebbs and flows of your business and think about seasonal fluctuations. You may find it’s more cost-effective to hire additional full-time, part-time or even temporary employees. Or you may want to consider implementing an automated scheduling solution to help manage labor costs.
One final consideration – this rule change was endorsed by the Obama administration, and heavily backed by the Democratic legislators, as such, pundits are offering the opinion that it is possible that any finalized rules and changes could be repealed if a Republican win the White House this fall.