How to prepare for proposed overtime rules

15 Oct

Human resource departments should prepare for the government's proposed changes to overtime.

If enacted as it currently is the new proposed changes to overtime pay by the U.S. Department of Labor will give nearly 5 million Americans extra pay, according to the Pew Research Center. Those millions of employees that could be eligible for overtime pay are working in salaried white-collar jobs where payment for working over eight hours a day isn't an option.

The new regulation could have a great affect on human resource planning and payroll management if it becomes law. Human resources will need to process more paperwork. Also, if a company wants to cut costs, it'll mean human resources and supervisors will need to keep track of how long employees work to ensure staff members don't go over eight hours a day or 40 hours a week. 

A new motion
As it is, the proposal raises the threshold for workers currently exempt from overtime pay. The current baseline, set in 2004, is $455 per week or $23,660 per year for employees who work over 40 hours a week. The new recommendation would allow staff members making $970 per week or $50,440 a year to be eligible for overtime compensation, too.  

According to the Pew Research Center, the threshold would rise each year if the government ties it to the Consumer Price Index or wage percentiles so it can keep up with inflation.

Remaining compliant
Companies and their human resource departments should draw up a plan of how to deal with any changes the motion could bring if it becomes law. According to the Society for Human Resource Management, business can prepare now while the Department of Labor reviews the public commentary about the proposed regulations. The department allowed anyone to comment on the proposal via a government website until Sept. 4, 2015, and so far it received nearly 200,000 responses, the SHRM reported.

"For critical positions that often result in overtime pay, employers should consider hiring more full-time, part-time or seasonal employees, or restructuring their workforce to offset a potential expansion of overtime pay," Phyllis Cheng, an attorney with DLA Piper, told the SHRM.

The proposed regulation could cause logistical problems for companies, leading some businesses to slash employee hours or cut back on benefits in order to pay out more in overtime salary. 

To curb this potential problem, employers should pinpoint which employees still fall under the overtime threshold and which ones are closing in on it, Paul DeCamp, an attorney, told the SHRM. A company could raise the salary of a staff member who's current salary is already near the overtime brink. Bumping up the employee's salary would keep him or her above the threshold and ineligible for overtime pay.  

Businesses might need to move workloads around, splitting them up among multiple employees to ensure none work overtime.

The proposal could also have a chilling effect on work-life balances. Employees who take work home with them or on the road could see their hours cut or monitored more closely. 

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