On June 30, 2015, the Department of Labor (DOL) released proposed changes to the overtime regulations. This survey was designed before DOL proposed these changes to the overtime regulations and represents the HR profession’s general perspective on FLSA overtime exemptions.

1. SHRM Survey Findings: HR Perspectives on Overtime
Exemptions
October 29, 2015

2. • Under the Fair Labor Standards Act (FLSA), employees are to be paid at a rate of at least one and a half times their
regular rate for any hours worked over 40 in a week, unless they have been classified as exempt under certain
specific statutory categories or meet other requirements in the regulations.
• Currently, an employee may qualify as exempt from the overtime requirements if he or she satisfies a primary duty
test and if he or she is paid on a salary basis at a rate equal to or greater than $455 per week ($23,660 annually).
Employees whose jobs are governed by the FLSA are either exempt or nonexempt. Nonexempt employees are
entitled to overtime pay. Exempt employees are not.
• On June 30, 2015, the Department of Labor (DOL) released proposed changes to the overtime regulations:
» Raising the salary level to the equivalent of the 40th percentile of weekly earnings for full-time salaried
workers as tracked by Bureau of Labor Statistics. DOL estimates that the 40th percentile will increase to $970
per week, or $50,440 annually, in 2016, when the rule is expected to go into effect.
» Adding a new provision to automatically update the salary levels every year.
» DOL did not make proposed changes to the duties test in the proposal. Instead, it asked for public input on
whether, in light of the proposed salary increase, any changes to the duties test are warranted.
• This survey was designed before DOL proposed these changes to the overtime regulations and represents the HR
profession’s general perspective on FLSA overtime exemptions.
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 2
Introduction

3. • Exempt employee – An employee who meets one of the FLSA exemption tests and who is paid on a fixed salary
basis and not entitled to overtime.
• Nonexempt employee – An employee who does not meet any one of the FLSA exemption tests and is paid on an
hourly basis and covered by wage and hour laws regarding hours worked, overtime pay, etc.
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 3
Definitions

4. • If organizations are required to reclassify exempt positions to nonexempt positions, what would be some
potential consequences? If required to reclassify exempt positions to nonexempt positions, 76% of organizations
reported that reclassifying may result in previously unbudgeted overtime costs. Additionally, 70% of organizations
indicated that an increase in employees’ opportunities to earn overtime pay would have a significant impact on their
organization. Increases in employee eligibility for overtime would not necessarily lead to additional pay for
employees.
• What type of scenarios will likely occur should the change in overtime regulations lead to an increase in
eligibility for overtime pay? Approximately seven out of 10 organizations believe that restrictive overtime policies
would lead to a likely reduction in employees working overtime (70%) and a likely decrease in workplace flexibility
and autonomy (67%).
• How often do organizations review employee classifications? Approximately one-half (53%) of organizations
review employee classifications as exempt or nonexempt under the FLSA when a position becomes open. Thirty-
nine percent of organizations conduct this review annually, and 6% never reassess employee classifications.
• What percentage of employees perform concurrent duties? Two-thirds (66%) of organizations employ salaried
employees who must regularly conduct nonexempt (i.e., hourly) tasks.
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 4
Key Findings

5. • In response to revised overtime regulations, HR professionals will need to determine how employees will
be affected by the new salary threshold and other rule changes. In particular, HR professionals working in
the non-profit sector, in small businesses, and in areas of the country where salaries tend to be lower,
should expect a more pronounced impact due to an anticipated 113% increase in the salary threshold.
• Although more employees will be eligible for overtime under the rule changes, HR professionals will need
to monitor labor costs closely. An analysis must be conducted to determine whether to raise salaries to
maintain the exemption for certain employees, whether to cap or eliminate access to overtime work, and
whether to otherwise adjust salaries to make sure that an employee’s total wages will remain the same
even if that employee’s overtime hours increase.
• With an increase in the number of non-exempt employees, HR professionals may find it more challenging
to offer workplace flexibility arrangements. Increased litigation under the Fair Labor Standards Act (FLSA)
means that HR professionals will need to put systems in place to ensure that non-exempt employees are
not working overtime hours and monitor employees’ remote work and use of electronic devices. HR
professionals will also need to develop a communications strategy to address the consequences of
reclassifying employees from exempt to non-exempt status, including the loss of morale.
• If the final rule includes changes to the duties test, which may include limiting the percentage of non-
exempt duties that managers are allowed to conduct, HR professionals will need to review the duties
performed by exempt employees and develop additional systems to monitor those duties to ensure that
employees are properly classified under the new rules.
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 5
What do these findings mean for the HR profession?

6. If overtime rules were changed so that employees who spend more than 50% of
their time on nonexempt tasks must be classified as nonexempt, what
percentage of your workforce would you need to reclassify?*
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 6
Note: n = 340. Respondents who answered “Not applicable” were excluded from this analysis. Percentages may not equal 100% due to rounding.
*Although the DOL did not propose changes to the duties test, HR professionals were asked about the potential impact.
76%
20%
3%
1%
Less than 25%
Between 25% and 50%
Between 51% and 75%
More than 75%

7. In your opinion, how significant of an impact would each of the following
potential consequences have on your organization if it were required to
reclassify exempt positions to nonexempt positions?
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 7
Note: n = 314-330. Respondents who answered “Not sure” were excluded from this analysis. Percentages may not equal 100% due to rounding. Data
are sorted in descending order by the “Significant” percentages.
76%
70%
61%
42%
15%
20%
24%
33%
9%
10%
14%
25%
Reclassifying may result in previously unbudgeted
overtime costs
Reclassifying may lead to an increase in
employees’ opportunities to earn overtime pay
Reclassifying may result in decreased workplace
flexibility and autonomy (e.g., choosing hours,
setting schedule)
Reclassifying may result in reduced opportunities
for career advancement within the organization
Significant Insignificant N/A – There would be no impact on my organization

8. In your opinion, how likely are the following scenarios to occur in your
organization, should overtime regulation changes lead to an increase in
eligibility for overtime pay?
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 8
Note: n = 312-318. Respondents who answered “Not sure” were excluded from this analysis. Percentages may not equal 100% due to rounding. Data
are sorted in descending order by the “Likely” percentages.
70%
67%
58%
34%
30%
33%
42%
66%
Restrictive overtime policies would be
implemented, leading to potential reduction in
employees working overtime
Decreased workplace flexibility and autonomy
(e.g., choosing hours, setting schedule)
More opportunities for employees to earn
overtime pay
Increased hiring to compensate for reduction in
employees working overtime
Likely Unlikely

9. In general, how often does your organization review employee
classifications as exempt or nonexempt under the FLSA?
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 9
Note: n = 337. Percentages may not equal 100% due to multiple response options.
53%
39%
2%
6%
11%
When a position becomes open
Annually
Monthly
Never
Other

10. In 2004, the white collar overtime regulations were amended and a $455
a week salary test was created. How did these overtime rule changes
affect your organization?
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 10
Notes: n = 227. Respondents who answered “Not sure” were excluded from this analysis. Percentages may not equal 100% due rounding. Data are
sorted in descending order.
82%
13%
4%
No significant change
We reclassified more exempt employees to
nonexempt employees
We reclassified more nonexempt employees to
exempt employees

11. Does your organization employ exempt (i.e., salaried) employees who must
regularly, in the course of their jobs, conduct nonexempt (i.e., hourly) activities?*
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 11
Note: n = 369. Respondents who answered “Don’t know” were excluded
from this analysis.
*Although the DOL did not propose changes to the duties test, HR
professionals were asked about the potential impact.
Yes, 66%No, 34%
Exempt employees regularly conducting
nonexempt activities
5%
15%
80%
More than 70%
Between 40 % and 70%
40% or less
What percentage of your exempt
employees regularly conduct both
exempt and nonexempt activities?
Note: n = 222. Only respondents whose organization employs exempt
employees that regularly conduct nonexempt activities were asked this
question. Respondents who answered “Not applicable” and “Prefer not to
answer” were excluded from this analysis.
*Although the DOL did not propose changes to the duties test, HR
professionals were asked about the potential impact.

12. Does your organization employ exempt (i.e., salaried) employees who
must regularly, in the course of their jobs, conduct nonexempt (i.e.,
hourly) activities?
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 12
Note: Only statistically significant differences are shown.
Comparisons by organization staff size
500 to 2,499 employees (80%)
2,500 to 24,999 employees (78%)
>
1 to 99 employees (52%)
100 to 499 employees (62%)
Comparisons by organization staff size
• Organizations with 500 to 24,999 employees are more likely than organizations with 1 to 499 employees to employ
exempt employees who must regularly conduct nonexempt activities in the course of their jobs.

13. SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 13
Demographics

14. Demographics: Organization Industry
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 14
Note: n = 328. Percentages do not equal 100% due to multiple response options.
Percentage
Manufacturing 19%
Health care and social assistance 18%
Professional, scientific and technical services 17%
Administrative, support, waste management and remediation services 11%
Finances and insurance 10%
Educational services 9%
Government agencies 9%
Retail trade 6%
Accommodation and food services 5%
Transportation and warehousing 5%
Whole trade 5%

15. Demographics: Organization Industry (continued)
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 15
Note: n = 328. Percentages do not equal 100% due to multiple response options.
Percentage
Religious, grantmaking, civic, professional and similar organizations 4%
Arts, entertainment and recreation 3%
Construction 3%
Information 3%
Repair and maintenance 3%
Real estate and rental and leasing 2%
Utilities 2%
Agriculture, forestry, fishing and hunting 1%
Mining, quarrying, and oil and gas extraction 1%
Personal and laundry services 1%
Other 2%

16. Demographics: Organization Sector
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 16
Notes: n = 326. Percentages do not equal 100% due to rounding.
52%
20%
16%
10%
1%
Privately owned for-profit
Nonprofit
Publicly owned for-profit
Government
Other

17. Demographics: Organization Staff Size
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 17
n = 324.
22%
33%
22%
17%
6%
1 to 99 employees
100 to 499 employees
500 to 2,499 employees
2,500 to 24,999 employees
25,000 or more employees

18. n = 331.
Demographics: Other
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 18
U.S.-based operations only 77%
Multinational operations 23%
Single-unit organization: An organization in
which the location and the organization are
one and the same.
30%
Multi-unit organization: An organization that
has more than one location.
70%
Multi-unit headquarters determines HR
policies and practices
51%
Each work location determines HR policies
and practices
3%
A combination of both the work location and
the multi-unit headquarters determines HR
policies and practices
46%
Is your organization a single-unit organization or a
multi-unit organization?
For multi-unit organizations, are HR policies and practices
determined by the multi-unit headquarters, by each work
location or by both?
Does your organization have U.S.-based
operations (business units) only, or does it
operate multinationally?
n = 330.
n = 234.
Corporate (companywide) 71%
Business unit/division 17%
Facility/location 12%
n = 234.
What is the HR department/function for
which you responded for throughout this
survey?

19. 19
SHRM Survey Findings: HR Perspectives on Overtime
Exemptions
• Response rate = 14%
• 413 HR professionals from a randomly selected sample of SHRM’s membership participated in this
survey
• Margin of error +/-5%
• Survey fielded June 18-July 6, 2015
Survey Methodology
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015

20. • For more information about DOL’s proposed FLSA overtime rule: www.advocacy.shrm.org/overtime
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SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 20
Additional SHRM Resources

21. Founded in 1948, the Society for Human Resource Management (SHRM) is the
world’s largest HR membership organization devoted to human resource management.
Representing more than 275,000 members in over 160 countries, the Society is the
leading provider of resources to serve the needs of HR professionals and advance the
professional practice of human resource management. SHRM has more than 575
affiliated chapters within the United States and subsidiary offices in China, India and
United Arab Emirates. Visit us at shrm.org.
SHRM Findings: HR Perspectives on Overtime Exemptions ©SHRM 2015 21
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