How the New Overtime Rules Will Affect Your HR Policies

With new overtime rules coming into effect on Dec. 1, 2016, now is the time to review your human resources policies. Millions of additional employees could become eligible for overtime, and your company will need to take immediate action to remain in compliance with Department of Labor regulations.

Three Options for Pay Changes

The new salary threshold for exempt employees is $47,476. Any employees who make less must receive overtime pay when they work more than 40 hours in a workweek. You have three options for adjusting your pay structure:

  • Raise salaries for employees in potentially exempt functions above the threshold to avoid paying overtime.
  • Prohibit employees from working more than 40 hours in a week.
  • Pay time-and-a-half for hours in excess of 40 per week.

Time Tracking Requirements

To comply with the new rules, you must keep records of the number of hours each employee worked per week. There is no requirement to use a punch-card or clock-in time tracking system.

Establishing a standard schedule and having employees either certify that they worked it or report changes is sufficient under the regulations. However, this should not be taken as an excuse for requiring employees to report a standard 40-hour schedule regardless of how long they actually worked.

If an employee reports to the Department of Labor or local authorities that they are being required to work overtime without compensation, your company may face heavy fines and potential litigation. As a best practice, ask employees to report their actual arrival and departure times each day.

Redefining Job Responsibilities

There is no change to the standard duties test. Currently exempt positions remain exempt, and nonexempt positions remain nonexempt subject to the new salary thresholds.

However, with the need to pay managers overtime or raise their salaries above the threshold, you should reevaluate whether managers are performing nonexempt duties and potentially delegate those tasks to overtime-eligible employees at lower levels of base pay.

Adjusting Staffing Needs

In line with your chosen overtime policy and restructured job responsibilities, you will need to adjust your staffing needs. This may include adding staff to ensure all tasks can be completed without overtime or to keep managers from performing nonexempt duties.

When making these adjustments, you will need to consider the cost of wages, potential overtime and fringe benefits. To ensure compliance with the new regulations and avoid fines, consider discussing your proposed new policies with your tax and legal professionals.

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