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3 Steps to Prepare for New Overtime Legislation

In May, President Obama announced the Department of Labor’s final rule that updates overtime regulations. In an effort to right-size the salary threshold of those eligible to earn overtime, the Fair Labor Standards Act bumps that threshold to $47, 476 (up from $23,660), enabling employees earning less than that in salary to earn overtime pay for hours worked over 40 in a workweek.

And, unless you’ve been living under a rock, you know that those new overtime rules are set to take effect on December 1, 2016.

There is an abundance of information on the task at-hand and what moves employers must make to ensure compliance. And while there are several things that businesses need to consider – and you should certainly tap your legal counsel for advice – here we’ve outlined a few basic steps company leaders can take in the case that they need to reclassify employees to non-exempt status.

Step 1: Determine Who Will Be Impacted

Starting now, businesses should evaluate which employees will be impacted by the change. Some questions to ask:

  • Who on your team is making less than $47,476? How much less than that are they making?
  • Who can you bump to meet the new threshold without having a negative impact on your bottom line?
  • Who can you consider for a promotion and get to that new threshold?
  • Which employees cannot be bumped up to the new threshold?

For those that can receive a salary increase, the issue resolves itself. But for those employees who can’t be bumped to meet the new threshold, you’ll need to reclassify them as non-exempt and pay them for overtime.

Step 2: Communicate Changes

For those employees reclassified as non-exempt and who will now be eligible to earn overtime, an internal communications plan will need to be created. This plan will need to be well vetted and include information about how one goes about logging their time to ensure they’re being paid their fair share of overtime. You and your leadership team may decide to require pre-authorization, whereby employees need to consult with their managers before working overtime each week. In addition, an internal time-logging system should be seriously considered for record-keeping purposes and for payroll.

Step 3: Document, Document, Document

Keeping track of hours worked and of pre-authorization forms is of utmost importance to protect the best interest of the employee as well as the business. Of course, we recommend routing forms via a secure system like Cabinet SAFE so that each pre-authorization form and timecard is saved to employees’ individual personnel record without ever leaving the system, safeguarding the integrity of documents and creating a lockbox of this important information. Not only does it protect the employee and ensure they are paid what they deserve, it also protects the employer. By implementing a system like this, business leaders are able to plan responsibly, granting only overtime they can afford to pay, while also safeguarding businesses against having to pay back-overtime if an employee leaves on unscrupulous terms and claims the employer did not comply with the new rules and did not compensate the employee properly.