DENTON, Texas (UNT) — By December 1, businesses across the U.S. must implement the Department of Labor’s final rule – a change in the Fair Labor Standards Act (FLSA) extending the threshold for overtime pay exemptions from $23,660 to $47,476 yearly. Human resource expert Julie Hancock, an assistant professor in the Department of Management at the University of North Texas, is available for interviews about the new regulations.
Contact Hancock at 940-565-3277 (office) or Julie.Hancock@unt.edu.
Hancock says the change can be nerve-wracking, but there are steps companies can take to feel secure.
First, she says, “ensure existing job descriptions match the federal descriptions and legal standard of what people are actually doing versus what the description or title is. Mismatched employees should be recategorized.”
A combination of the job’s title, duties and wages determines whether a position is exempt or non-exempt from the new overtime requirements. Salaried employees may earn overtime, depending on their exemption status. Non-exempt employees are eligible for overtime compensation at a minimum of 1.5 times their regular hourly wage equivalent.
“The misclassification of workers has been rampant. Companies that fail to properly classify workers open themselves up for legal action. Many businesses have had this problem for a long time because there has been a lack of understanding of what employees’ duties entail. That will have to change.”
Next, determine how to implement changes. Businesses can choose to pay the time-and-a-half rate for eligible employees who work overtime, increase base pay to a level above the new threshold, limit non-exempt workers’ hours to 40 hours per week, or any combination of the three – then put a plan in action that takes into account the worst-case scenario.
“Look at what the numbers do as you’re looking at your company’s financial forecasts,” she says, adding that time tracking is important too. “If your company is going to limit hours to 40 a week, then you need to capture better data about any accidental employee overtime, and your management team must determine how to track hours for employees in and out of the office.”
Additionally, communicate any restructuring, pay fluctuations or changes in job description to employees.
She noted that not everyone will be happy. Salaried workers moving to hourly may have to put in more time to get the same paycheck. Conversely, hourly employees moving to salaried may see smaller paychecks after the loss of overtime pay.
However, for some, the change will be welcomed. Salaried and exempt employees working overtime may now be reclassified to hourly and non-exempt and therefore receive overtime pay for their extra work. And reclassified workers moving from hourly may like the “prestige” and paycheck certainty of being salaried.
“The way employees are told whether or not they are exempt will determine whether they choose to stay with that company. This is especially important for individual employees who are going to see a change in their classification. They must see why the changes are being made and how it benefits them.”
Finally, collaborate. Hancock says that multiple departments – legal, accounting, communications, human resources, etc. – should be included in the conversation.