Thursday June 2, 2016
7 Ways to De-Hassle the New Overtime Regs
Long before the Department of Labor announced the final version of the new regulations affecting exemption status from overtime, all kinds of handwringing and alarm-sounding was going on. Still is. It sounds something like this:
- Businesses may reduce pay for those impacted to offset overtime.
- Businesses will have to buy expensive time and attendance systems to track time.
- Morale will tank for professionals moved to nonexempt status.
I’m not wild about what I see as an extreme increase in the salary basis test, taking the annual salary threshold for exempt status from $23,660 to $47,476. A moderate increase makes sense. It hasn’t changed in 12 years and should be increased by some reasonable amount. More than doubling is not reasonable. So some of the alarm is understandable. Some of it, however, comes from those with a product to sell you. That might be what you need, and it may not.
The good news is you have time. This doesn’t take effect until December 1, which is huge. The better news is that the Duties Test – or the definition of jobs and responsibilities that are considered exempt – did not change. The best news though, may be that there are some alternatives to consider. As onerous as this change may be, here are some ways to de-hassle it that may make it more palatable for your organization:
- Understand What’s Involved. Now’s a great time for you to brush up on what “suffer or permit to work,” “time worked,” “on call time,” “travel time,” “meal period,” and a whole lot of other defined terms mean. Numerous employers have messed up on some of this, and it can cost. Be sure you and your supervisors know what you need to.
- Use a System. All that’s required by law is that hours are accurately recorded. Since the onus is on the organization, you want a system that’s as infallible as possible. But in reality, unless you’ve had no nonexempt employees, your need is not much different now than it was before. You don’t have to use an expensive solution. There are other ways, including paper, Excel or Google forms and spreadsheets, even using your CRM or network login. Of course, there’s an App for that… lots of free ones in fact. Check the ITunes Store or the Google Play Store. Just realize that whatever system you use, there are ways to mess it up no matter how much it costs. The “system” you need is more of a process that includes consistency, review, and validation. Find one that works for you and work it.
- Consider Variable Pay. Unlike in the past, the salary threshold can be met with a combination of base salary and non-discretionary bonuses, incentive pay, or commissions. 10% of the threshold can be these forms of variable pay, as long as it’s paid out quarterly. There are a lot of professionals making between $42,728.40 and $47,476.00… some of whom work considerably more than 40 hours per week. You don’t necessarily have to pay them overtime, nor bump their salary to $47,476 which could create other ripple effects.
- Consider Salaried Nonexempt Status. There is something between Salaried Exempt status and Hourly Nonexempt status. You can pay nonexempt employees on a salaried basis. You lose the ability to dock pay based on the quantity and quality of work (so someone who took a ½ day off would still be paid the normal salary). The overtime calculation though, gets slightly less expensive with every additional hour over 40 per week. It’s a little complicated and you still have to track hours, but it could help with the morale issue.
- Consider “Payroll by Exception.” The law doesn’t require employees to clock in and out, nor does it require employers to provide a system to do so. You can keep a record of the schedule the person typically works, and record the number of hours the worker actually worked only when the person varies from the schedule. That could also help the morale issue.
- Record Only Total Hours Worked. The law also doesn’t require employees to record the time they start and end work. You could ask employees to merely record the total hours they worked each day. That may feel like less control than the traditional methods of clocking in and out, or the expensive methods of elaborate systems. This method could make your team feel like you are treating them more as trusted professionals. That would also help morale.
- Create and Enforce a Policy. If you’re concerned about the cost of overtime, be sure you have a policy in place that requires overtime to be approved in advance. If someone works overtime without preapproval, you still have to pay it – you can’t take the defense that the employee didn’t follow the policy. All you can really do is confront the employee, coach, discipline, and even terminate. But if you make it clear up front – not just the policy, but the “why” behind it – you have a better chance that your people will understand and follow that direction. The “why’s” could include the need to keep costs down so that staffing levels, Holiday Parties, bonuses, etc., aren’t jeopardized by this change in a regulation. Just don’t get in the position where employees are working overtime without recording it.
No matter what way you choose, you will provide maximum dehasslization (yes I create words) by involving your team in the process. What you see as a great solution could come off less so if it’s just imposed on those it impacts. You are the leader, and you have an organization to lead. But the best way to get people to follow your lead is to include them in decisions that impact them. Talk about this change and what it means. You’ve got time; the effective date of the change is about a half year away. Let me know if I can help.