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.