Preparing for the Department of Labor overtime policy

The Department of Labor’s new overtime regulation will take effect in less than a week: Dec. 1, 2016. This change requires action from businesses across a variety of industries. Preparation is vital for employers affected by the regulation, as they must ensure they don’t face expensive noncompliance fees.

An updated threshold
It’s important to begin by breaking down what this new rule means. After the DOL published a Notice of Proposed Rule making in July 2015, the challenge to update the previous overtime mandate was underway. In May 2016, President Obama published the final rule regarding this issue, following months of sifting through comments and concerns sent from business leaders across the country.

The new regulation more than doubles the annual salary threshold – increasing the cap from $23,660 to $47,476. Employees who make less are thereby entitled to additional compensation from their company. The guidance also increases the weekly level as well – from $455 to $913.

Despite lawsuits and complaints from various independent organizations worried about how the update will affect their overall budget, the overtime rule is still set to go into effect on Dec. 1, 2016. Although time is winding down, businesses can still prepare for the new regulation to lessen its impact on their company.

Here are three ways how they can accomplish just that:

  1. Educate employees
    Workers rely on their employers to not only understand local, state and federal rules, but maintain compliance with these guidelines. People want to know their company has their best interests at heart, even if government mandates require changes to the way businesses operate.

Organizational leaders need to communicate the differences between the current overtime rule and its upcoming change. Alterations can be difficult for companies to handle, but they’re even more stressful if workers feel out of the loop. Keeping people informed will help businesses maintain employee satisfaction and show workers that their employer is taking the necessary steps to ensure they’re compensated appropriately.

  1. Analyze eligible employees
    The DOL’s new overtime rule is expected to extend overtime compensation to over 4 million employees over the next few years. That’s because in addition to the updated salary threshold in effect Dec. 1, the cap will increase every three years – starting January 2020. While preparing for the upcoming deadline is critical, businesses also need to look ahead at what their workforce will be entitled to over the coming years.

To begin this planning, employers should count the number of exempt and nonexempt overtime workers on their roster. While the exempt employees may not be able to receive additional pay starting Dec. 1, the upcoming increases could qualify them. Once company leaders have an estimate of the number of people eligible for overtime – now and in the future – they can start to prepare appropriately.

  1. Adjust compensation
    With the knowledge of how many employees are eligible for extra pay, companies have the option to adapt workers’ compensation and better prepare their budget. The Society for Human Resource Management offered three actions business leaders could take:
  2. Reclassify positions that pay between $23,660 and $47,476 from exempt to nonexempt and pay these workers overtime when they reach more than 40 hours per week.
  3. Raise salaries above $47,476 to keep employees ineligible for overtime.
  4. Reorganize the duties tied to particular jobs. That way, employees can be sure to complete their tasks within 40 hours per week, limiting the likelihood of overtime compensation. The responsibilities can be shifted to exempt workers, keeping in mind the original obligations of their own positions.

The staff at Robert F. Murray & Company, CPAs can answer your questions about how these rules may impact your business. Give us a call today at 989-772-1209 (Mt. Pleasant) or 989-631-9500 (Midland).