7 Steps to Prepare for Overtime Changes
Millions of workers will soon be eligible for overtime due to the U.S. Department of Labor’s new overtime thresholds. This change goes into effect on December 1, 2016. And there’s a good chance staff on your payroll will now be eligible. Here’s how you can start preparing.
In December the minimum salary threshold will more than double. And the Department of Labor plans to increase these thresholds every three years to keep pace with inflation.
New Overtime Thresholds
| 2015 | Effective December 1, 2016 | |||
|---|---|---|---|---|
| Annually | Weekly | Annually | Weekly | |
| Employee Threshold | $23,660 | $455 | $47,476 | $913 |
| HCE Threshold (highly compensated employee) | $100,000 | $134,004 | ||
Conduct an overtime checkup.
Are you ready for the change? Here are seven things to consider:
1. Check regulations to make sure you’re complying appropriately. (You might want to call your legal advisor to be sure.)
2. Review current employees to see how the changes will affect them (and your payroll). Pull a report of how many employees are currently on salary and check whether their income falls above the new minimum threshold.
3. Consider employee classifications. Overtime can be a cost-effective way to handle seasonal or temporary demands without hiring new employees. You’ll want to weigh the cost and benefits for your organization and how much overtime you expect. Refer back to your list of employees on salary who don’t meet the new minimum salary threshold.
- Will you reclassify them to hourly employees and pay overtime?
- Will you keep them on salary and pay overtime?
- Will you bump up salaries over the thresholds to avoid overtime altogether?
Whatever you choose, these changes will need to be communicated in advance to your employees.
4. Configure your system to calculate employee hours, especially for employees who shift from salary to hourly. Manual errors put overtime savings in jeopardy. Make sure your pay rules are correctly set to calculate overtime pay and maintain compliance with FLSA provisions, other labor laws and union regulations. If you need help with this, we can help.
5. Create a salary change schedule if you plan to increase salaries above the threshold. These changes should be communicated with your employees and be in effect by December 1.
6. Monitor overtime to keep costs from escalating. Use a manager dashboard to edit or change schedules in real time. Set up alerts that can trigger when employees work longer than scheduled. Make sure everyone is prepared to review and approve employee overtime requests, handle any errors or exceptions flagged by the system, and properly report all hours worked.
7. Adopt time tracking technologies that help managers keep an eye on overtime (like alerts and notifications) and enforce your organization’s policies. This also ensures accurate data collection and reporting.
The best way to manage overtime is to be aware of potential pitfalls and overtime issues—and start planning now.
