May 18 2016)(
DOL Enacts Sweeping Changes to Overtime Rules
Late Tuesday night, May 17th, the Department of Labor’s website was updated with their final ruling, which updates the overtime regulations to reflect the original intent of the Fair Labor Standards Act, and to simplify and modernize the rules so they’re easier for workers and businesses to understand and apply. The landmark change is expected to be officially announced later today. The new ruling is a result of a 2014 directive from President Obama to the Secretary of Labor. The new rule will go into effect December 1st, 2016. When all is said and done, the DOL estimates two thirds of all businesses will have affected workers and somewhere between four and five million Americans will gain higher wages. Restaurant and retail managers, office administrators, and entry to mid-level white collar professional workers are among the most affected.
The New Ruling Will:
Raise the salary threshold amount from $455/week to $913/week – on an annualized basis, the amount changes from $23,660 to $47,476.
Automatically update the salary threshold every three years, based on wage growth over time, increasing predictability.
Strengthen overtime protections for salaried workers already entitled to overtime.
Provide greater clarity for workers and employers.
1st Payroll Helps You Navigate These New Rules
Step 1 – Understand the new rules
Employees need to receive $47,476 or more in annual salary or they must be paid OT for every hour in any week they work over 40 hours. Other regular, taxable pay like taxable stipends or allowances can count to the $47,476, but irregular, discretionary pay types like bonuses and commissions count only 10% toward the total.
Step 2 – Identify salaried employees making less than $47,476
Before December 1, 2016, 1st Payroll’s payroll specialists will be reaching out to each of our clients to notify them of any employees who make under the threshold and what the employee’s annualized salary is currently. However, it is a good time to take stock of current payroll right now.
Step 3 – Estimate how many hours over 40 per week these employees work in a year
Refer to your time & attendance records? If you are not accurately tracking time, ask each employee directly how many hours of overtime that employee works each year. Remember to take into account all the busy periods and seasonality of the business.
Step 4 – Make choices on a per employee basis about what action to take
For affected employees, make one of the following choices:
• Raise the employee’s salary to at least $47,476.
• Change the employee from a salaried to an hourly employee. Track the employee’s hours and pay them as you would any other hourly employee.
• Leave the salary as it is and pay overtime as needed. Calculate the employee’s overtime pay rate, track the hours worked and report any “Salary OT” with each payroll.
• Leave the salary as it is and prohibit the employee from working overtime. Track the employee’s hours worked, and as the end of the week nears and make sure to send the employee home if they are approaching overtime.
Step 5 – Communicate these changes with your employees
Many employees could view a change from a salaried to an hourly worker as a demotion. Employees who have to clock in and out for the first time may view that as a negative. Employees just below the threshold may be happy to receive a raise, but be sure to consider the effects on the employees making just above the threshold, too. Do you have to also offer those employees raises to keep the office hierarchy intact? Each business should have a plan in place for necessary changes and for communicating these changes to your employees.
Step 6 – Focus on compliance by tracking the hours worked
The Department of Labor is going to follow these changes with employer audits where each company will have to produce records of hours worked for its employees making less than $47,476. In the case of disputes, it is the company’s word against the employee’s unless there is time tracking. Notice in Step 4 above, 3 of the 4 compliance choices involve tracking time. 1st Payroll has Time & Attendance solutions which are integrated into the cloud based products we already provide you, such as PlatinumPay and PlatinumPay Xpress. Let us know if you would like more information about our timekeeping products, but whether you use one of ours or not, make sure to document time worked moving forward.
To schedule a quick demo of our web-based Time & Attendance products, and to stay in compliance with this new DOL update, email Eric@1Payroll.com or call your payroll specialist at 978-346-9025.
Question 4 – All You Need to Know:
Recently, the voters of Massachusetts approved a measure which will require all businesses in the state to provide Earned Sick Time to employees. The good news for employers; as of today, Earned Sick Time does not become a requirement until July 1, 2015. However, this has quickly come to the forefront for many small business owners. Last week, we had many proactive clients calling with high levels of curiosity – What does this mean for my business? Does this apply to me? What do I have to do? How am I going to accurately track Earned Sick Time?
The Long and the Short
If you have eleven or more employees, they will be able to earn and use up to 40 hours of paid sick time per calendar year.
If you have less than eleven employees, those employees can still earn and use up to 40 hours of sick time per calendar year, however, this earned time can be unpaid.
According to Question 4, employees can use Earned Sick Time:
1.) To care for a physical or mental illness, injury or medical condition affecting the employee or the employee’s child, spouse, parent, or parent of a spouse.
2.) To attend routine medical appointments of the employee or the employee’s child, spouse, parent, or parent of a spouse.
3.) To address the effects of domestic violence on the employee or the employee’s dependent child.
How Do Employees Earn Their Sick Time?
This is perhaps the most frequent question we had from clients last week. There is no need to worry, though. Not every one of your employees will automatically have 40 hours of Earned Sick Time every year. An employee will earn one hour of sick time for every 30 hours worked. Employees can carry over up to 40 hours of unused sick time to the next calendar year, but can not use more than 40 hours in one calendar year. It is important to note, employers would not have to pay employees for unused sick time at the end of their employment.
- Your employee works 10 hours per week. They will earn 4 hours of Earned Sick Time after 12 weeks of work. They will earn a little over 17 hours of Earned Sick Time in one year.
- Your employee works 20 hours per week. They will earn 4 hours of Earned Sick Time after 6 weeks of work. They will earn a little over 34 hours of Earned Sick Time in one year.
- Your employee works 30 hours per week. They will earn 4 hours of Earned Sick Time after 4 weeks of work. They will max-out, and earn 40 hours of Earned Sick Time in one year.
- Your employee works 40 hours per week. They will earn 4 hours of Earned Sick Time after 3 weeks of work. They will max-out, and earn 40 hours of Earned Sick Time in one year.
The new law will not override employers’ obligations under any contract or benefit plan with more generous provisions. If you currently have a plan which provides as much paid time off, which can be used for the same purposes, and in the same conditions, you will not have to provide additional paid sick time.
How Do I Track This?
The first thing you’ll want to do is review your time-off accrual policies. If you already offer an appropriate plan, and you are taking advantage of our time-off accrual tracking, there shouldn’t be much you need to do besides continue to monitor your employees’ available balances. If you do not have a plan in place, we can help you stay in compliance with the law. Our time-off accrual services is an easy add-on, and can be set up at anytime.
We can automate your tracking by accruing the appropriate amount of time earned per payroll. Your employees tracked balances can be tied to a “Sick” pay code, and will be reduced whenever you submit “Sick” hours in your payroll. Not only can every employee’s available balance be displayed on their pay stub, but you can easily access each employee’s stats of earned, used and available time with our online payroll – whether it be PlatinumPay or PlatinumPay Xpress. Lastly, we can provide you with a summary report every payroll, giving you a one-page snapshot of all of your employees earned time totals.
To setup an automated plan to track Earned Sick Time, and stay in compliance with this new Massachusetts law, email Eric@1Payroll.com or call your payroll specialist at 978-346-9025.