Change has been in the air for some time now so hopefully the latest news isn’t too much of a surprise. On May 18th the Department of Labor (DOL) released its final new rules. These new rules will take effect December 1, 2016 and will affect some 4.2 million salaried employees.
According to the Department of Labors’ website “In 2014, President Obama directed the Secretary of Labor to update the overtime regulations to reflect the original intent of the Fair Labor Standards Act, and to simplify and modernize the rules so they’re easier for workers and businesses to understand and apply. The department has issued a final rule that will put more money in the pockets of middle class workers – or give them more free time.”
Under the new rule, the wage threshold test is more than doubling from today’s $23,660 ($455 per week) to $47,476 ($913 per week). The limit will be adjusted every three years beginning January 1, 2020. Employees earning less than $47,476, regardless of their job responsibilities, are deemed non-exempt, and therefore entitled to overtime pay.
As an Employer what can you do:
- Pay time and a half for overtime work
- Raise workers’ salaries above the new threshold
- Limit workers’ hours to 40 per week (or less)
- A combination of the above
Is a worker Exempt or Non-exempt?
Unless specifically exempted by one of the tests below workers covered by Fair Labor Standards Act must receive pay for hours worked in excess of 40 in a workweek at a rate of not less than one and one-half their regular rate of pay.
Two test determining whether an employee can be classified as exempt are:
- The wage threshold test (which is being raised) and
- A duties test, under which employees who regularly perform executive, administrative or professional duties can be deemed exempt.
As a Customer of HBS what do I need to do?
Every client is different, and therefore every client’s implementation is different. Most clients probably don’t need to do anything to their ecotime system. For the most part we get the FLSA status as part of the nightly import of your Masterfile. Once the employee’s FLSA status is update in the Payroll or HR system it will automatically be updated in the ecotime system.
Some considerations you might want to think about:
Planning and Testing
You need to evaluate each employee’s status and determine if any are going to be impacted by these changes. If you have either one or many employees with a FLSA status change from exempt to non-exempt plan on doing some testing. This change in status will entitle them to receive overtime if they work the eligible time. Be sure to include new employees in the test. Their work scenarios may be different than the scenarios you have planned and tested already.
The DOL regulations require that the new rules go in effect December 1, 2016, this is a Thursday and most likely falls in the middle of your pay week and or pay cycle. There is never a penalty for paying employees more than required, but there are strict fines for paying employee less than is required. You need to consider when you are going to convert any effected employees’ FLSA status from exempt to non-exempt. We recommend planning your FLSA cutover be before the beginning of the pay cycle that contains December 1st 2016. Please keep in consideration any complexities you may have if you run multiple pay cycles.
Call Customer Service
We are here to help, so please give customer service a call with any questions or concerns. We will help you plan for a clean smooth transition. We recommend calling early in your planning stage. It is always better to plan early than have to quickly react when things don’t go smoothly.