The document summarizes new overtime regulations that will take effect in December 2016, including raising the minimum salary level for exempt employees from $455 per week to $913 per week. It discusses the impact on employers, such as increased costs from paying overtime and adjusting employee salaries. It provides guidance on classifying employees as exempt or non-exempt, determining overtime eligibility, and developing a compliance plan to address the rule changes. Employers are advised to evaluate their pay practices, monitor employee hours, and communicate changes to their staff.
3. New Overtime Regulation
Effective December 1, 2016
Boost to employee income
Workers Fairly Compensated for
hard work
Estimated Annualized Direct
Employer Impact
$239.6M - $255.3M per year
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4. Overtime Regulation - Now & Then
Current regulations
(2004 until effective date of Final Rule, 2016)
Final Rule
Salary Level $455 weekly $913 weekly
40th percentile of full-time salaried workers in the lowest-
wage Census region (currently the South)
HCE Total Annual Compensation
Level
$100,000 annually $134,004
90th percentile of full-time salaried workers nationally
Automatic Adjusting None Every 3 years, maintaining the standard salary level at the
40th percentile of full-time salaried workers in the lowest-
wage Census region, and the HCE total annual
compensation level at the 90th percentile of full-time
salaried workers nationally.
First Update Jan 1, 2020 - Rise to more than $51,000
Bonuses No provision to count nondiscretionary bonuses
and commissions toward the standard salary
level
Up to 10% of standard salary level can come from non-
discretionary bonuses, incentive payments, and
commissions, paid at least quarterly.
Standard Duties Test Wage & Hour Fact Sheet #17A for a description
of EAP duties.
No changes to the standard duties test.
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5. Fair Labor Standards Act
Establishes Minimum Wage, Overtime Pay, Recordkeeping, and Youth
Employment Standards Affecting Employees in the Private Sector and
in Federal, State, and Local Governments
Employers with Annual Gross Sales Volume of $500K+, Health Care
Facilities, Schools and Public Agencies – both State & Local
Government
No Exemption for Small Businesses or Non-Profit Organizations
Non-Exempt Workers Entitled to Minimum Wage no less than
$7.25/hr
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6. Overtime
Receive Pay for Hours Worked in Excess of 40 hours in a Workweek at a Rate
Not Less than One and One-Half their Regular Rate of Pay
Workweek - 7 Consecutive 24-hr Periods
Bi-weekly Payroll Example – 80 Hours Total
Week 1 – 35 hrs Week 2 - 45 hours
5 OT hours for Week 2
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7. Nondiscretionary Bonuses &
Incentive Payments
Salary Basis Test
Fixed rate of pay for fixed number of hours each week
Includes Commissions
Satisfy up to 10% of New Standard Salary Threshold
• Maximum $4,747.60 can be applied
• Made on Quarterly or More Frequent Basis
Nondiscretionary Bonus
Awarded if Employee Meets Performance/Productivity Goals Set by
Employer
Commissions or Bonuses Might not be Earned from Period to Period
Not Enough Commission or Bonuses in any Given Quarter
Entitled to Overtime Pay for any Overtime Hours worked during the
Quarter
One catch-up payment at end of quarter
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8. Exempt vs. Non-Exempt
Salary Exempt Employee
Receives minimum weekly wage
Exempt from FLSA OT Regulations based on job duties
and responsibilities
• White Collar Exemptions: Administrative,
Executive, Professional, some Outside Sales or IT
No requirement to track hours
Salary Non-Exempt Employee
Salary rate for fixed number of hours
Eligible for OT after 40hrs per week at rate of 1.5
times the hourly rate
Morale booster – sense of status & autonomy
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9. Duties Test
Administrative Employees
General Business Operation
Independent Judgement
Executive Employees
Department Manager
Ability to Hire/Fire Employees, Change Status, Advancement/Promotion
Professional Employees
Advance knowledge in a field of science or learning obtained by specialized instruction
Work that is original and creative in a recognized field of artistic endeavor
Teaching in a school system or educational institution
IT Staff
Performs work that requires the consistent exercise of discretion
Outside Sales Employees
Sales of tangible or intangible items, Obtains orders or contracts for services
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10. Other Overtime Considerations
Federal, State & Local Laws
Follow the law that is more generous to the employee
Compensatory Time
Illegal to give Non-Exempt employees comp time instead
of paying them overtime
Child Labor
Federal and state laws include special provisions to protect
workers younger than 18. These laws can affect the type
of work, wages, and hours that an employee can work
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11. Budget Impact
Compression Issue
Salary Realignment to Maintain Valuations in
Salary Structure
Limit Future Salary Increases
Increased Costs – FICA Taxes, Social Security &
Medicare Payroll Taxes, Benefits Cost
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13. FLSA Action Plan
Review Employee Classifications
Evaluate employee salaries
Review Compa-ratios within each salary grades
by employee’s time in position
Manage & Monitor Employee Hours
Time & Labor Management System
Various Pay Option Comparison
Impact on Internal Pay Equity
Cost Controls
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14. Compensable Worktime Policies
Waiting Time
On-Call Time
Rest & Meal Periods
Sleeping Time
Meeting & Training
Travel Time
Use of electronic devices for work-
related purposes outside of regular
work hours
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15. Employee Communications
Communicate prior to the Dec 1st Deadline
Review Updated Policies
Time Management
Increased Efficiencies
Accessibility
Maintain Morale
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18. Thank you!
For more information, please contact:
Dawn Royer, Senior HRIS Consultant
Direct: 860-269-0507
Email: droyer@cmshris.com
Cost Management Services, LLC.
321 Main Street, Farmington, CT 06032
Phone: 1-800-517-9099
www.cmshris.com
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Notas do Editor
Intro
On May 18, 2016 - Department of Labor final rule updating the overtime regulations, which will automatically extend overtime pay protections to over 4.2 million workers within the first year of implementation.
This long-awaited update will result in a meaningful boost to many workers’ wallets ensuring every worker is compensated fairly for their hard work.
Review Slide
Just a quick review of the FLSA Standards
Employees covered by FLSA to be paid at least one and one-half times their regular rate of pay for any hours they work beyond 40 in a workweek*
Workweek defined as 7 consecutive 24-hour periods - When calculating overtime pay, each workweek must stand alone
For example, an employee works 35 hours one week and 45 hours the next week for a total of 80 hours. Even though the total hours averages to 40 hours worked each week, the employee must still be paid for the five overtime hours worked during the second week.
When an employee receives payment on a salary basis, this means that he does not receive payment according to the number of hours he works but according to the number of hours expected by the employer. The employer indicates the number of expected hours in writing or based on an agreement with the employee.
commissions or bonuses that might not be earned from period to period, then relying on those payments to get an employee over the salary threshold could put the employer at risk
employers are permitted to make one “catch-up” payment to the employee at the end of the quarter to compensate for the shortfall
When an employee receives payment on a salary basis, this means that he does not receive payment according to the number of hours he works but according to the number of hours expected by the employer. The employer indicates the number of expected hours in writing or based on an agreement with the employee.
employees must use independent judgment in performing the majority of their job duties.
Morale booster – feeling of having status
Where federal, state or local laws differ, employers must follow the law that is more generous to the employee.
Take stock and review classifications.
2) Closely manage and monitor employee hours. To better understand the amount of overtime that is currently being worked, monitor employee hours and use appropriate tools to help make educated scheduling decisions. One effective method is to implement an automated time and labor management system that continuously tracks hours worked, helps companies monitor when an employee nears the overtime threshold and makes it easier to create more cost-effective schedules.
3) Compare the costs of various pay options. Weigh the costs of raising employees' salaries to meet the exemption criteria against what it would cost to reclassify them as nonexempt and pay them overtime when they work more than 40 hours per week.
4) Consider the impact on internal pay equity. Beyond the costs of raising exempt employees' salaries, consider the impact on internal pay equity so that employees are paid fairly when compared with other employees within your organization. If you substantially increase some employees' pay, other employees may have questions about why their pay isn't increasing.
5) Proactively control costs. Develop alternative labor strategies that make it possible to shift expensive overtime hours to other workers who can be paid at a regular or lower rate. Monitor fluctuations and patterns in the volume of work, and align employee schedules accordingly, so that work can get done without creating overtime situations.
Upon completion of your salary review – we recommend you review and revise these policies as these items will impact your overtime pay
Communications to your employees is important.
Reduce the element of surprise
Explain what & why things are happening
Not a reflection on their performance
Provide updated policies with Managers to review how to manage hours & budgets appropriately