New overtime regulations: What you need to know
The Department of Labor recently updated regulation that completely changes who is eligible for overtime pay. This deeply affects the hourly industry, most notably managers, and you want to make sure you get all the facts so you are completely prepared to handle the changes when the new regulation is enacted.
These new rules cap off President Obama’s goal of making things easier on the middle class. He points out that four decades ago more than 60 percent of American workers qualified for overtime based on their salary level, compared to 7 percent now.
Right now, too many Americans are working long days for less pay than they deserve. That’s partly because we’ve failed to update overtime regulations for years — and an exemption meant for highly paid, white collar employees now leaves out workers making as little as $23,660 a year — no matter how many hours they work. – President Obama
Today, the only way a worker is eligible for time-and-a-half pay is when they put in more than 40 hours a week and earn less than $23,660 a year ($455 a week).
Effective Dec. 1, 2016, an hourly worker will be eligible for time-and-a-half pay when they put in more than 40 hours a week and earn less than $47,476 a year ($913 a week).
Basically, any employee who does not make the salary threshold and classify as exempt will be entitled to overtime pay after they’ve put in 40 hours that week.
The Labor Department is predicting that this change will increase wages by $12 billion over 10 years. In addition, this new law will require an update to the threshold every three years based on inflation. They are predicting the threshold could rise to more than $51,000 by 2020.
Who is affected
This new overtime threshold will boost the pay of more than 4.2 million U.S. workers and, according to the National Retail Federation (NRF), cost retail and restaurant businesses approximately $745 million to comply with these new rules. Unlike other labor laws, this regulation is not dependent on company size and all businesses must comply.
Why you should care
Similar to what happened after the Affordable Care Act in 2010, the NRF is predicting that many employers will start to scale back employee hours and might have to cut base pay to make up for the difference in overtime pay. They are also expecting some employers to increase the amount of workers on staff in order to make sure their business needs are met without anyone going over 40 hours per week. More workers equals less hours per employee.
How to deal
The most obvious thing you can do to lessen the cost of this new rule is to keep your employees at 40 hours a week or less, if you don’t think you can afford the time-and-a-half pay or can’t raise wages to meet the threshold. This will mean that having a clear, organized scheduling tool will be more important than ever.
You’ll need a way to easily keep track of everyone’s hours and to keep a very close eye on shift changes and swaps. The old way of paper schedules and verbal shift swapping will not work with this new threshold and could easily cause businesses to overlook employees passing 40 hours per week.
Technology is making it easier to keep track of hours, shift changes and employee communication. We’ve put together a list of ways you can maximize workers’ schedules so you’re not caught off guard on Dec. 1.