First of all, it looks like this thing is going to happen, so if you have been avoiding reading the details or considering what the impact will be on your business, it is time to pay attention so you can be ready for the biggest change in labor laws in many years. Millions of employees will be eligible for overtime pay who are not eligible today!
Here is what you need to know:
First. This change could affect your business if you have exempt employees – that is employees (you might refer to them as salaried) who are not paid overtime when they work more than 40 hours per week.
Second. It will affect your business if those exempt or salaried employees do not make at least $47, 892 per year because you will have to start paying them overtime (1 ½ times their hourly rate) for hours worked over 40 per week or increase their salary to $47,892. That threshold is double what it is today. And according to the proposed new law, the base salary will move with inflation.
Third, the changes are expected to be announced in June and you’ll only have 60 days to make the change – so start thinking about how you will handle the change.
What do you do now if you have employees who will be impacted?
First, determine if your exempt employees meet the qualifications under the Fair Labor Standards Act duties test. It’s a good idea to have the job description updated and reviewed by an HR Consultant or labor attorney. It is a good time to make sure you are following the laws surrounding overtime pay.
Second, look at how many hours these employees are working. Are they working more than 40 hours, consistently or is it just occasionally? Talk to their managers and come up with an estimate (or start monitoring now) on what the cost will be to pay overtime to those employees. Adjust your payroll budget accordingly.
Third, depending upon how many additional hours you are looking at, you might need to hire an additional hourly employee to make sure the work gets done without overtime. It might be less expensive than paying the overtime.
Next, consider how you might adjust the workload of your employees so that all of the employees are able to get their jobs done in 40 hours.
Look at the salaries of the exempt employees – if they meet the qualifications of the Fair Labor Standards Act duties test– and they are close to the $47,892 per year you might want to bring them up so that you are in compliance with the law. Especially if they are working a few hours of overtime every week. They will appreciate not losing the benefit of being exempt (for starters no clocking in and out and tracking hours) as well as the bump in pay.
Lastly, once you have your plan in place, communicate to the employees what changes are coming and why!