Friday, June 17, 2016

New overtime rules effective December 1, 2016

Plan now: New Rules for Payroll Overtime

By Jim Fletcher, Certified Business Advisor, Wenatchee SBDC

In May 2016, the Fair Labor Standards Act (FLSA), which governs federal minimum wage and overtime pay requirements, was amended. Those changes are effective December 1, 2016.  


What's in your manual?
Do you have an employee handbook?
It is time now to prepare for changes in employee positions. 

If your employees are already eligible for overtime pay, these changes do not affect those positions in any way. However, if you have employees who are classified as exempt from overtime then those position classification are affected. 

What FSLA changed is the limit on when exempt position are eligible for overtime pay. Presently exempt employees making more than $23,660 doubled to $47,476; resulting in a situation where some employee positions will need to be reclassified to non-exempt and will be eligible of overtime pay. 

For some businesses the reclassification of positions can result in other HR issues such where the decision to reclassify workers as nonexempt requires further decisions, such as whether to:

  • Maintain workers’ pay rate and pay additional overtime.
  • Maintain their pay rate but limit their hours.
  • Reduce their pay rate to maintain cost neutrality for overtime worked.
  • Newly nonexempt employees retain their professional duties even though they are now paid overtime.
  • Newly nonexempt employees lose some or all of their professional duties. 


In addition, for employees being reclassified, there are options with respect to their duties, including:
  • Newly nonexempt employees retain their professional duties even though they are now paid overtime.
  • Newly nonexempt employees lose some or all of their professional duties.

Do you need to revise or
develop job descriptions?
As business owners we are keenly aware that changes to any employees position and pay can start a series of adjustments for all employees, an emotional fall out form those who feel they were not given fair consideration. 

Owners and managers need to review their employee positions. Identify any presently exempt positions that will be impacted and plan for appropriate changes.  It is highly recommended that you planning include talking to an HR advisor as well as your payroll accountant. 

Discuss with your advisors overtime controls and policies, setting clear overtime work expectations, compliance with eligibility rules, how to present changes to employees.

Some additional reading:

Overtime is more than an issue of compensation. Effective employee relations strategies can alleviate common confusion and dilemmas surrounding overtime.

As a supervisor of non-exempt employees, you’re responsible for seeing that employees accurately record the time they work and receive overtime when it’s due. This article looks at managing overtime issues through workplace atmosphere, communication, and expectation setting. 

Those businesses that aren’t good at managing employee overtime hours effectively could easily be creating problems for themselves for the present and for the future. 

4 Overtime Traps to Avoidby Chris Kelleher 
Overtime. It's been a law for almost 70 years. If you thought that after all that time every business would know how to follow it, you would be very, very wrong.

Alleging violations of the overtime law is a new "growth industry," with employees (and their lawyers) going after everyone from mom-and-pop businesses to industry giants. To keep your business from becoming yet another lawsuit statistic, here are four common overtime traps and how to avoid them:   

OvertimeManagement Techniquesby Lisa McQuerrey, Demand Media 
Overtime, or time worked beyond a standard 40-hour workweek by hourly, non-exempt employees, can wreak havoc on the operating budget of a small business. 

While there may be times when overtime is necessary and cost-effective, overtime pay can begin to drain your bottom line if not managed correctly. Advance planning and scheduling can help reduce the need for employees to work in excess of their scheduled hours.