2016 Wage and Hour Update New Overtime Rule
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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.
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2016 Wage and Hour Update New Overtime Rule
- 1. Wage & Hour Update New Overtime Rule www.cmshris.com
- 2. Agenda Introduction New Overtime Regulation FLSA Compliance Employer & Employee Impact FLSA Action Plan Employee Communications Sage Solutions Q & A www.cmshris.com
- 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 www.cmshris.com
- 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. www.cmshris.com
- 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 www.cmshris.com
- 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 www.cmshris.com
- 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 www.cmshris.com
- 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 www.cmshris.com
- 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 www.cmshris.com
- 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 www.cmshris.com
- 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 www.cmshris.com
- 12. Benefit Impact Benefit Contributions – Medical, Dental Qualified Retirement Plans STD & LTD Benefits PTO allowances Flexible Work & Tele-Commuting www.cmshris.com
- 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 www.cmshris.com
- 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 www.cmshris.com
- 15. Employee Communications Communicate prior to the Dec 1st Deadline Review Updated Policies Time Management Increased Efficiencies Accessibility Maintain Morale www.cmshris.com
- 16. Sage Solutions Sage HRMS Sage HRMS Payroll Employee Self Service Sage Benefits Enrollment Sage Time & Attendance Sage HRMS HR Actions Sage HRMS Alerts & Workflow Sage HRMS Talent Management www.cmshris.com
- 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 www.cmshris.com
Editor's Notes
- 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