We're Headed for Overtime

If you're an employer with a bunch of workers making just under $50,000 a year, prepare to work overtime to get your company ready for the new overtime rules.

Under this new ruling, which was announced May 18 and is set to go into effect Dec. 1, overtime pay will automatically be extended to more than 4 million Americans in its first year in effect, according to the U.S. Labor Department. All employees earning less than $47,476 per year and working more than 40 hours per week will be considered eligible for time-and-a-half overtime pay. This new standard is set at the 40th percentile of earnings and will be automatically reapplied every three years.

With that said, are there any companies that won't be significantly affected by these changes? Brian Baxter, vice president of human resources at Modere, a personal care company based in Springville, Utah, said, “Organizations with operations in states with higher costs of living [and] with generally higher wages will not have many adjustments to make.”

Still, not all companies will be so fortunate.

Even with these changes being finalized, the future of this overtime regulation is still daunting, and its effect on the workforce is uncertain. Scott Bales, senior director of customer success at Replicon Inc., a time-keeping software company based in Calgary, Alberta, Canada, which provides services to many large U.S. companies, has examined the new overtime rule.

Replicon data found that an employee from a small to medium-size business works on average 25.5 hours more overtime per year than a worker from a large employer. For a business with employees who regularly log overtime hours, Bales suggests examining the type of work that is being completed during these extra hours. For instance, “If someone is consistently working over 40 hours but is spending a lot of time on administrative tasks, this [could] be delegated to another person to not only reduce costs but also support that person in focusing on more strategic and career development opportunities,” Bales said.

Baxter shares a similar mindset. He said, “The biggest concern is cost.” Before the new overtime rules go into effect, “a detailed analysis will have to be done to determine if it's better to simply move salaries above the new threshold or to move them to nonexempt and bite the bullet of overtime pay.”

While re-examining the financial effect that the overtime rule will have on salaries and budgets is important, it is not the only factor that employers should consider when preparing for changes in their company. According to Bales, employers need to look at the overtime rule from business operations, workforce management and legal standpoints, and employers should also be conscious of how changes might affect employee morale.

Even after examining these factors, many employers will still be left wondering how exactly they can prepare their business for the rapidly approaching overtime rule. Bales said employers have

four options.

The first option requires employers to reclassify jobs as nonexempt and pay for excess overtime hours worked, and this, Bales said, is the easiest of the four options.

The second option is employers can reclassify jobs as nonexempt, and by defining what constitutes overtime hours, companies can maintain a tighter grip on costs. However, Bales warned: “This can be difficult to curtail, and managers will also need to be more proactive and vigilant in monitoring hours.”

The third option is to classify jobs as exempt and raise employees' pay to meet the new salary threshold.

The fourth option, Bales said, is one “role could be divided into two jobs to attempt to reduce overtime payments. Depending on the role, it may make sense to delegate tasks and look at how this could also support greater efficiencies.”

Even with an upcoming presidential election, the new overtime rule isn't likely going anywhere. Bales said, “The overtime rule is an executive rule change, not legislation. If the next president, however, is against the new rule, it can be reversed - although this will take a long time

to do.”

Whether an employer supports or opposes the new overtime rule, it sounds like their best option is just to get used to it - and start putting in some overtime to get ready for it.

AnnMarie Kuzel is an editorial intern at Workforce. Comment below or email editor@workforce.com.

Tags: overtime, US Labor Department, wages

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