In the recent past the biggest HR Compliance issues revolved around the ACA, calculating whether you were a “Large Employer” or could escape the mandatory Medical Benefit requirements. Then came the great question about what and how to do the required reporting for ACA. This year there is a new HR concern on the horizon which we believe with have an even bigger impact on your bottom line than ACA!
As we discussed in our complimentary Webinar in December, changes in the FLSA regulations have been proposed, and we believe this will be the latest and greatest cost concern for businesses of any kind to date. The Federal DOL has proposed that the “Salary Test” for an exemption from overtime, which is currently $455* per week ($23,660 per year), will be increased to a whopping $970 per week ($50,440 per year). Yes, a 113% increase – overnight! The DOL has not proposed any new “Duties Test”, and they have asked for input from the Public for suggestions on the possible needed changes in Duties to be allowed to exempt an employee from Overtime.
* The State of CT’s minimum is currently $475 per week ($24,700 per year).
Based on all of the latest input from organizations who monitor these changes (SHRM, Large multi-state law firms, etc.), we believe the “Salary Test” will remain at this new level, and the “Duties Test” will remain pretty much as is, with perhaps an increase in the number of employees a manager will have to manage to be exempt from overtime based on the Executive Exemption (that may increase from two to three – or more, subordinates).
We have also heard that the actual release of the new regulations will not occur until the second half of the year. Many organizations believe that because nothing has changed, they can just ride it out and wait until the final rulings are released before taking any type of action. In our opinion, this would be a very large mistake. Experts agree that when the final regulations are released, there will be a short window of time to implement the new guidelines – Thirty (30) days or less!
Start Today- Review job descriptions
We recommend that you start by reviewing job descriptions and salary structures. We are currently working with clients to review both duties and salaries. Our experience has been that most job descriptions are out of date and don’t represent the employee’s current role. Once job descriptions have been solidified, you can then determine which roles meet the duties test for the overtime exemption.
Determine your strategy
Once you’ve completed your job description review, you may find that you have employees who are currently exempt and significantly below the minimum salary requirements. How will you move forward? Raising salaries to meet the new minimum will have a budget impact and changing employees to non-exempt status may have an impact on morale.
Develop a communication plan
A well developed communication plan to your employees will help to integrate change into your organization. Once you determine your strategy (raising salaries or changing status), you will want to communicate with each affected employee and you may need to communicate at the organizational level. Your managers are key to the success of this communication so spend the time to educate them.
Put systems in place
Deciding to change an employee’s status from exempt to non-exempt requires that you have appropriate systems in place to track overtime. Additionally employees who have not needed to track their hours previously, will have to form new habits. Making this transition as simple as possible for your employees will go a long way toward them accepting the change.
As your organization prepares for these FLSA changes consider the following questions:
- Do you have time to do all of this within a thirty day window – Review all the descriptions for both duties and salary?
- Will you be able to do the analysis and make thoughtful business decisions about which direction to go in?
- Will you be able to come up with the proper communication program to roll out the new regulations and disseminate it to all of your employees so they understand and are comfortable with any needed changes?
- ow are you going to track the hours to ensure they are properly paid any overtime due them? What happens to your budget projections?
There are so many things to think about, and so many questions to answer around these new guidelines (when they are released) – Do you feel confident that you can do all of this within a short time frame of thirty days or less?
We at KardasLarson, believe it could be a costly mistake to put this task off!
START NOW – DON’T WAIT!
Photo Credit: David Edwards via Flickr