Your Four-Step FLSA Survival Guide
By Amy Newman-Wells, Director of Marketing, Paycom
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Now that the U.S. Department of Labor's rules on overtime are slated to become effective Dec. 1, 2016, you probably feel the pressure of leading your organization through new compliance obligations while trying to minimize the impact these requirements have on your company. At the same time, you have to balance all the responsibilities already placed on HR. You want to do a good job, but it's no easy task and the stakes are high.
We understand. Not only do we face the same issues as an employer, but we talk to hundreds of clients every day looking for ways to better manage their compliance processes so they can be free to focus on the other issues they care about. Our conversations and experience have helped us identify four common steps -- and the technology -- to help you manage the requirements of the Fair Labor Standards Act.
Step 1: Audit Your Classifications
As the number of workers eligible for overtime pay is increasing, so is the scrutiny of your existing pay and employee classification practices. It's more important than ever to make sure your employees are classified correctly as the Department of Labor ramps up enforcement efforts.
Understanding which employees meet standard exemption criteria under the Fair Labor Standards Act's job duties tests -- and classifying your employees accordingly -- can help your company survive a Department of Labor audit. Consider the following information in your analysis:
* Job titles do not determine exempt/nonexempt status.
* Employees must satisfy all the requirements of a specific exemption to pass the duties test for that exemption.
* In an audit, you may be required to produce proof for the type of exemption you are claiming for your exempt employee.
* Exemption types include executive, administrative, professional, creative professional, computer, outside sales and highly compensated.
After evaluating the duties of each employee, you can decide the appropriate steps for meeting the new overtime salary threshold.
Step 2: Compare Your Options
While you may be tempted to take a one-size-fits-all approach regarding overtime expansion, a more strategic alternative exists. For example, after identifying salaried employees making less than $913 per week ($47,476 per year) and determining the amount of overtime they currently work, you can analyze and compare by employee, position and/or department the cost to:
* Raise salaries to meet the new threshold requirement.
* Change classifications to nonexempt and pay overtime.
* Change classifications to nonexempt and reduce hourly pay rates to where the new rates plus overtime pay equal the current salaries.
* Hire additional full-time employees to handle the overtime work.
When you can weigh the cost of the different scenarios in a side-by-side comparison, you can identify the least disruptive and most cost-effective strategy for compliance.
Step 3: Communicate Changes Companywide
One of the biggest hurdles with compliance-driven organizational change is effective communication with employees. Keep in mind the positive and negative impacts the changes may have on your people, then strategize what needs to be communicated, by whom, when and how. Your learning management platform should help you standardize compliance communications across your organization to gain greater employee understanding and buy-in.
For example, you can utilize learning management tools to educate on:
* Company vision,
* Changes to overtime policies and procedures,
* New job duties, and
* Talk tracks for managers on how to communicate changes to employees.
Not all of your employees may experience a positive impact from overtime expansion. The sooner they understand the changes taking place, why they're happening, how they are impacted and what any new expectations will look like in relation to their job duties, the more opportunity you have to minimize negative effects on company culture.
Step 4: Check Your Technology Capabilities
In times like these, you have serious decisions to make, along with an executive suite expecting answers and a solid compliance strategy. You can't afford for your HR technology to fail you. You need to be confident in your reports and analysis, and able to count on a smooth execution, no matter what workforce changes you implement. Think about whether your HR solution can help you to:
* Automatically compare my overtime options?
* Effectively manage overtime?
* Easily implement labor restructuring changes?
* Instantly communicate with and train employees?
* Accurately track my HR, pay and overtime data in a single system of record?
The right technology can help you rise above the regulations and focus on the strategies that drive a thriving company and culture, while automating the important processes that facilitate compliance. See how at Paycom.com/focus.
Disclaimer: The information provided herein is for general informational purposes only. Accordingly, Paycom does not warrant the completeness or accuracy of the above information. The information provided herein is not, and should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.