Protect Businesses and Employees from Overtime Issues – Workforce Management Technology
Worried About Overtime Regulations? How to Ensure Businesses and Employees alike are Prepared and Protected with Workforce Management Technology
Regulation changes can always be tough to manage. They raise questions from employers like, “How will my business prepare?” and “How will this affect my bottom line?” On the other hand, employees often have questions around how their jobs and company culture will be impacted. In fact, this is exactly what numerous companies and employees around the country are facing after the U.S. Department of Labor (DOL) announced its updated regulations for overtime compensation.
Taking effect on Dec. 1, 2016, the new overtime rules will extend overtime protections to an additional 4.2 million workers in the United States by raising the salary threshold from $23,660 per year to $47,476. This means that nearly all workers on lower salaries are entitled to time-and-a-half pay whenever they work more than 40 hours in a week. The new threshold is based on the 40th percentile of income for salaried full-time workers in the region of the country with the lowest wages. For now, this region is the Southern United States. In addition, inflation adjustments will be made every three years using the same 40th percentile criteria. The first update will come on Jan. 1, 2020, and based on projections of wage growth, the threshold is expected to rise to more than $51,000.
Currently, only seven percent of U.S. full-time workers qualify for overtime based on their salaries – an 89 percent decrease from 1975. So what caused this dramatic decline? Under earlier regulations, “high level” workers were exempt from overtime based on the “duty test.” Essentially, many employers altered job descriptions to make it seem as if lower-level employees were performing more expert-level duties and tasks, exempting them from overtime requirements. The new rule, which eliminates the gray area and clearly outlines the prerequisites, is projected to increase the percentage of those who qualify for overtime to up to 35 percent.
Now, with mere months until the ruling goes into effect, it is more important than ever that both business owners and employees understand the impact the law will pose on them. It is also crucial that they are prepared to handle the changes and are protected for complying with the law.
The Impact for Employers
First and foremost, the new regulation means that businesses must tackle the challenge of accurately tracking all hours for their employees to comply with the Fair Labor Standards Act (FLSA), especially for employees earning less than $47,476. If these employees work more than the allotted 40 hours, businesses will face the added cost of providing overtime compensation.
Less experienced workers, particularly those new to the workforce, stand to gain the most from the new law. For example, recent college graduates, who tend to earn $30,000 to $40,000 a year in entry-level positions, will be a part of this group. The shift from a fixed salary to tracking working hours is bound to increase their compensation when they work more than 40 hours per week.
Meeting these additional costs, however, could mean spending cuts in other areas for businesses. In some cases, businesses might choose to completely overhaul their payment structures to deal with the Department of Labor’s new rules.
Ultimately, employers have four ways to comply:
- Raise workers’ salaries to be above the $47,476 threshold to make them exempt from overtime pay and exempt from tracking hours.
- Pay the required time-and-a-half overtime for low earning employees that do work over 40 hours, but start tracking hours worked, even for salaried employees.
- Ensure employees under the threshold are not working overtime by tracking and limiting workers’ hours to 40 hours per week.
- Convert salaried employees to hourly, start tracking hours worked and pay overtime for hours over 40 per week – essentially keeping the amount paid to the employee largely the same.
The Impact for Employees
The changes that businesses are making to comply with the new overtime laws will inevitably have an effect on employees as well. While it could mean a higher fixed salary to bump employees over the threshold, those who remain under the threshold are bound to face new requirements and changes.
For example, shifting responsibilities so that work can be completed on a 40-hour work week schedule might involve changing employees’ roles, training employees on new duties, and implementing a new system of operation.
Further, employees who are used to choosing the hours they work could now face new monitoring requirements such as:
- Limited 8-hour daily schedules.
- Clocking in and clocking out for each shift, even if salaried if below the threshold.
- Completing work within a set time frame; allowing for less flexibility to attend to personal business during the day or to work from home.
- Taking scheduled rest periods and meal breaks.
Even supervisors, managers and professional workers who telecommute may find themselves having to record the time they work away from the office, which could cut into any sense of flexibility or autonomy that an employee currently enjoys.
Helping Businesses Prepare
Now that employers understand how their businesses and employees are going to be impacted, how can they prepare themselves leading up to the change in December? The best thing to do is be proactive and follow auditing tips including:
- Reviewing their business’s overall compensation structure to see who is affected by the change.
- Getting a head start on these issues by educating their staff members. For example, explaining why they are now keeping closer track of hours worked for all staff.
- Reviewing jobs and tasks assigned to their employees and conducting a time analysis of who is working overtime under the new law. This includes considering job duties, whether jobs are being completed in efficient manners or if a second employee could perform the job.
- Completing a cost-benefit analysis. Businesses must determine whether or not they can afford the costs that it takes to make employees exempt under the new threshold.
- Begin tracking their employees time, meal breaks and rest periods to ensure compliance with general labor laws for all employees; hourly and salaried that earn less than the threshold.
- Adjusting duty responsibilities for their employees so that work can be completed during a 40-hour work week if overtime is too costly.
- Evaluating whether it is more cost efficient to hire part-time workers or replace the positions that qualify for overtime pay.
- Reviewing existing time tracking systems and making upgrades, if necessary.
Utilizing Technology for a Seamless Transition and Protection
Even with these tips, figuring out how to ensure a smooth transition to regulations can still be daunting. Luckily, workforce management technology is providing all-in-one solutions for small businesses and enterprises across the country. Not only does the technology help provide companies with necessary protection to comply with government hurdles, it also helps them improve general business demands like enhanced team communication, task management, and performance management. Here are some ways that workforce management technology can assist with a seamless transition and provide protection:
- Better recordkeeping. The importance of accurately tracking employee hours has been stressed time and time again. Software and digital time sheets make archiving easy and accurate. Some technologies even offer GPS and facial detection options to track hours. This reassures employers that their records are exact, and helps avoid any discrepancies – like when employees clock in for one another.
- Shifts are established based on anticipated sales and traffic. With workforce management technology, anticipated costs versus sales are available to managers in advance as they are making scheduling decisions. This allows schedules to be more stable – no more calling in last minute shifts for unexpected demand or sending people home when businesses are overstaffed. This also enables companies to reduce reliance on overtime hours and help them optimize schedules to maintain compliance.
- Stress profiles alert managers to over-scheduling. Solutions with built-in stress alerts can notify managers when employees are scheduled for too many hours per day or week, back-to-back shifts, or too many days in a given week. These alerts not only help managers monitor the morale of their workforce, but can also signal when non-exempt employees are close to reaching the 40-hour time-and-a-half benchmark. In return, employers can determine whether or not to modify existing schedules.
- Employees are empowered. Retention is an issue at most companies today, and employee unrest has been making headlines across the globe. Workforce management technology helps puts power in employees’ hands to opt into shifts and manage their schedules, while allowing employers to comply with the overtime regulations by approving or rejecting changes based on costs and overtime forecasts. Technology can also help prevent “clopening” (scheduling an employee to close and then open the next morning) – an issue that is resulting in many disgruntled employees. In response, a more empowered workforce will equal less turnover and lower onboarding costs for businesses.
Ultimately, workforce management technology helps ensure that companies all across the country will be prepared for the December 1 deadline. Further, while the new overtime regulations will soon be behind us, it is not going to be very long until another regulation is going to come across the table. Before that happens, companies will want to be sure they are equipped with the solutions necessary to continue business with ease.
About Jason Walker
A thought leader within the SaaS and retail industries, Jason Walker has more than 20 years of experience, and has worked with some of the biggest brands you know, including Home Depot, HP, Best Buy, Target, Apple, and Nokia.
Jason currently serves as President, Americas of Deputy, a leading global workforce management solution.
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