5 Things The Changes Mean For Your Business
1. You will have to reclassify your employees and do it right.
There has always been a certain degree of murkiness around who is exempt from Overtime Protection. The EAP Duties Test is complicated to understand and implement, especially in small businesses. And this is the reason why labor experts believe that about 70% of companies may not be in compliance with the provisions of FLSA. Misclassification is rampant.
As a result of the new Overtime Protection Rule awareness amongst workers is rising rapidly. They now know that an employee may be considered exempt only when all three criteria listed below are met:
- The worker receives a salary and not hourly wage
- The worker earns no less than $47,476 annually and $913 weekly
- The worker performs at least one duty from the EAP Exemption Duties Test on an ongoing basis. This most prominently includes supervising an area of the business while directing other workers, undertaking jobs that require advanced knowledge and handling strictly administrative (non-manual) tasks that call for independent judgment.
The blurred lines and loopholes will disappear. The simple assumption that salaried individuals are automatically exempt will not be accepted anymore. Businesses
that choose to neglect the specifications of the ruling and the knowledge of the employees might end up with a large segment of misclassified salaried, non-exempt workers who earn less than $47,476. These individuals will now be supported to seek legal redressal if they are not compensated for time beyond the 40-hour work week, leading to disputes.
2. Any course of action you choose to implement should be sustainable and financially feasible.
A detail that most SMBs are glossing over is the automatic threshold revision scheduled to happen every three years – starting January of 2020. The reason behind this decision is to catch up with inflation and respect the sentiment of “Fair Pay for Hard Work”.
Companies that wish to increase the salary of employees who are “non-exempt” to take them beyond the threshold need to brace themselves for a number of undesirable consequences like forced pay hikes every three years and dissatisfaction of workers who earn slightly more than $47,476 annually and thus may feel left out of the compensation revision.
3. You have limited time to comply with the new Overtime Protection Rule.
Any strategy that you go with will have to be fleshed out, considered for sustainability and then deployed by December 1st, 2016. Workers who will be reclassified as a result of the decision will also need to be briefed of new duties and given time to regain optimal productivity. The adjustment is bound to be hectic, especially for small and medium-sized businesses that have a lot to take care of and limited resources.
4. You can still have workers with flexible schedules.
Good news! No regulation of the 2016 Overtime Protection Rule restricts worker flexibility in any way. Employees are not required to stay tied to their desks. They do not have to punch in-out clocks, and they can even telecommute. The only
non-negotiable mandate pertains to tracking the number of hours spent working for the employer.
5. The one and a half overtime pay rate will have a major cumulative impact.
Do the math yourself. If you are paying an employee about $20 an hour and this individual didn’t qualify for protection prior to the new ruling then after December 1st, 2016 he/she will be entitled to an overtime wage rate of (1.5 * $20) $30.
Even if this worker puts in only an hour of overtime every week, in 4 weeks he will earn an extra $120. This translates into $1.5K a year! Now compound this number to account for multiple individuals and you have to get very particular about how you use the 40 regular hours available.
Is your business ready for the new changes? We can help. Contact us today to find out.