FLSA Rule on Overtime Pay
The Department of Labor’s final rule on overtime pay under the Fair Labor Standards Act (FSLA), released May 18, will mean adjusting numerous compensation practices to comply with the new rule, HR managers and advisors say.
The Fair Labor Standards Act (FLSA) final rule takes effect on Dec.1, 2016. Meg Ferrero, assistant general counsel at ADP, suggests employers take these steps to prepare for the deadline:
- Take stock and review classifications. Any exempt employee who earns greater than the threshold amount ($47,476 under the new rules) may remain exempt from overtime pay if that person primarily performs executive, administrative or professional duties as described in the regulations. Also, keep in mind that each state may enact regulations that differ from federal regulations; employers will be subject to whichever set of directives is more generous to employees.
- Closely manage and monitor employee hours. To better understand the amount of overtime that is currently being worked, monitor employee hours and use appropriate tools to help make educated scheduling decisions. One effective method is to implement an automated time and labor management system that continuously tracks hours worked, helps companies monitor when an employee nears the overtime threshold and makes it easier to create more cost-effective schedules.
- Compare the costs of various pay options. Weigh the costs of raising employees’ salaries to meet the exemption criteria against what it would cost to reclassify them as nonexempt and pay them overtime when they work more than 40 hours per week.
- Consider the impact on internal pay equity. Beyond the costs of raising exempt employees’ salaries, consider the impact on internal pay equity so that employees are paid fairly when compared with other employees within your organization. If you substantially increase some employees’ pay, other employees may have questions about why their pay isn’t increasing.
- Proactively control costs. Develop alternative labor strategies that make it possible to shift expensive overtime hours to other workers who can be paid at a regular or lower rate. Monitor fluctuations and patterns in the volume of work, and align employee schedules accordingly, so that work can get done without creating overtime situations.