Fair Labor Standards Act (FLSA) — December 1, 2016
Beginning in December, about 4.2 million more Americans will qualify for overtime pay under new rules from the U.S. Department of Labor. If you own a small business and have full-time employees, there's a good chance these rules will apply to you. Being diligent and planning for this change now can help your business, later down the road.
Before the new rule takes effect, businesses should review the status of all their salary employees. The new law affects salary employees who make more than $913 per week. Therefore, those who are currently on salary, make less than this amount and work more than 40 hours per week, should be converted from salary to hourly employees.
For those employees who currently work more than 40 hours per week, then some math is involved. Calculate their pay — if the straight hours plus overtime hours amounts to less than $913 per week, then switching these employees to hourly pay may benefit the company.
There are certain peak times when your employees usually put in overtime so you may want to take this into consideration when calculating a budget. Determine whether it's more cost efficient to pay the overtime to employees or hire more employees for either full time or part time work. Consider your work process and your work force since sometimes overtime may be unavoidable. If you account for this fluctuation early on you can adjust your budget accordingly.
It might be time for your company to implement new data collection and reporting systems to keep track of your employee's time. Employee time and attendance will be more important than ever and keeping track of these hours could be the difference between paying regular pay and paying a higher amount.
Certain time keeping programs not only help you track employee hours, but can also alert you to employees who are approaching overtime hours — helping you to plan accordingly. For those employees who are classified as non-exempt, new policies may need to be introduced that would include the amount of after hours work and weekend work allowed.
The biggest impact of this new law will be on the employees, so it's critical that they are updated on the changes to ensure its overall success. Once you've set a clear time related policy you will need to train all employees so they can become familiar with the details. Clear communication with your employees, including management personal, will help to prevent surprises arising, at the company's expense, down the road.
Some time tracking programs automatically deduct minutes or hours generally set aside for certain activities such as breaks, admin or lunch. When employees do not abide by these then an error in time tracking can occur. Appoint someone within the company to not only monitor these times, but also double check with employees during set breaks, to ensure these breaks are actually being taken. This reduces the chances of unanticipated overtime payments to employees and ensures that all employees are following company policies.
There is no one solution that best fits every business, therefore a trial and error period may be needed to work out the bugs and prepare for the unexpected. Work with your employees to discuss which changes will be most beneficial. This will help them feel that they are part of the solution and the policy that results will be one that best suits the needs of your business.
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If you'd like some help unraveling all the new regulations, our PROs are standing by and ready to help. And because we understand that the resources of small and emerging businesses are stretched, we're offering you a one-hour consultation, FREE. To set up your free consultation, contact any of our PeoplePro specialists — help is only a click away.