The Department of Labor recently finalized overtime regulations that will affect nearly every U.S. business. Under the new rule, most workers earning a salary less than $913/week ($47,476/year) are no longer exempt from overtime -- and must be paid time and half for 40+ hours. There's a lot of confusion surrounding the new overtime rule, particularly what employers can and cannot do with affected empoyees. You have options! Scroll through to learn more about seven of them.
1. Raise the employee’s salary to keep the overtime exemption.
For white-collar salaried employees under the $47,476 threshold, you may want to bump them up to or above this level to maintain the exemption. This is best (and still cost-effective) for employees close to the new minimum who meet the law’s requirements for exempt status (the “job duties” test) and regularly work overtime, freeing you from the obligation of calculating their overtime hours.
2. Convert the employee’s pay from salary to a reduced hourly rate.
The FLSA doesn’t require you to convert pay based on a 40-hour week, so you can switch employees who no longer qualify for exempt status to a lower hourly rate (but not lower than the applicable minimum wage) to absorb the added overtime costs. For example, if a salaried employee typically works a 50-hour week, you can determine an hourly rate that yields the same take-home pay, accounting for 10 of those hours being paid at the overtime premium.
3. Pay overtime, as needed, along with the employee’s current salary.
The FLSA also doesn’t require you to convert non-exempt employees from salaried to hourly to calculate overtime pay. You can continue to pay your newly overtime-eligible employees the exact same salary, plus overtime when they work 40+ hours a week (and they must keep accurate records of all hours worked). This makes sense for employees who typically work 40 hours or less a week, with only occasional spikes. It’s also the option that will meet the least resistance by affected employees.
4. Prohibit overtime and adjust workload.
Although this approach is appealing because it helps control payroll costs, it requires you to explore other arrangements to meet work demands. This may include restructuring to shift duties around, having other employers or teams take on the extra work, outsourcing, or hiring temps or part-timers to cover the extra work at a lower rate.
5. Communicate to your staff to control rumors.
Many employees will misinterpret the new overtime rule and what it means for them. Early on, you’ll want to emphasize that this is a federal law change – not a company initiative. Remind employees that a variety of legal factors determine who is eligible for overtime, and hourly vs. salary doesn’t reflect a person’s rank or overall compensation level.
6. Continue to offer flexible work arrangements and other perks.
The new overtime rule affects the salary threshold only, not other arrangements and opportunities you provide employees. For example, you don’t have to follow a predetermined schedule, so if you allow flex hours, keep doing so.
7. Choose the timekeeping system that works best for you.
Although you must keep careful records to ensure workers get paid the wages they’ve earned, you can choose the particular method. This can be manual, electronic or some other combination, as long as you’re capturing the number of regular and overtime hours worked each day.