The Department of Labor (DOL) Overtime Pay Rule coming in April will change overtime pay. Most notably, the DOL wants to increase the minimum salary needed to avoid overtime pay. The proposed increase is $35,000 to $55,000 a year.
Even though the rule is still under review and might face legal issues, it's likely to happen and will affect about 3.6 million workers. As a result, HR professionals need to plan for these changes now.
Here's a simple action plan for HR professionals:
Understand and Follow the Rules:
The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards for employees. It applies to workers in the private sector, and in federal, state, and local governments.
Covered nonexempt workers receive a federal minimum wage of no less than $7.25 per hour. Employees must receive overtime pay after working 40 hours in a workweek. The overtime pay rate is one and one-half times the regular rate of pay.
At present, exempt workers, specifically those in administrative, executive, and professional roles, must earn at least $684 per week ($35,568 a year) to qualify for this exemption.
The DOL's recent proposal aims to increase this minimum to $1,059 per week ($55,068 annually). And, there is the potential for this amount to rise with future cost-of-living adjustments.
In fact, the proposal includes a plan to automatically revise this salary benchmark every three years. This automatic revision necessitates ongoing financial planning. If you have exempt employees under the white-collar exemptions, those who earn less than the proposed amount, planning is crucial.
Decide on Pay Changes:
Figure out which employees earn between the old and new salary limits. You'll need to decide whether to raise their pay to keep them exempt from overtime or change their status to non-exempt. This decision involves looking at how much they earn, overtime rules, bonuses, benefits, and payroll systems.
Think About Employee Morale:
You can reclassify employees to non-exempt status. However, this could have a negative impact on morale.
Many employees associate prestige with being classified as an exempt-salaried employee, they like the flexibility that comes with being salaried, and they don’t want to track and record their hours worked. Therefore, employees may view a switch to non-exempt status as a demotion.
Communicate:
Good communication is crucial. Provide written communication to each employee about specific changes to their compensation. Explain any new responsibilities that come with these changes, such as timekeeping and record keeping. Be clear and open to prevent confusion and keep trust.
Train Managers and Employees:
Teach both managers and affected employees about the new rules. This includes how to track hours, approve overtime, and follow break rules. Proper training can help avoid mistakes.
Check Job Duties:
Make sure employees who are still exempt fit the job requirements. This can prevent problems with misclassifying employees.
Follow State Laws:
Remember, some states have stricter rules than the FLSA. Make sure your company's policies meet both federal and state laws to avoid issues and treat employees fairly.
By being proactive and detailed, HR professionals can manage this change well. This is a chance to show your commitment to treating employees fairly, which can improve morale and trust in your company. Good planning, talking openly, and educating everyone will help your organization smoothly transition to the new rules.
