New Federal Overtime Rule on the Horizon

The U.S. Department of Labor (DOL) has proposed changes to the Fair Labor Standards Act (FLSA) overtime rules. The proposal seeks to raise the salary threshold to $35,308 or $679 per week. The rule, if it becomes final, is anticipated to go into effect on January 1, 2020. 

There is much good news in this ruling. Unlike previous rulings, nondiscretionary bonuses may be considered as part of the salary base in this new ruling. Also, unlike the 2016 ruling, there are no automatic increases to this amount.

If you have not put a plan in place, now is the time. Can you answer the questions below?

• Are you certain that your employees are properly classified now?
• Are you willing to risk thousands of dollars in unnecessary payroll expenses?
• Can you anticipate and forecast how this will impact your bottom line?

Now is the time to revisit your options. If you are considering reclassifying employees and changing compensation for hours worked, you will still have time to get ahead of the new regulation.

There are a number of things to take into consideration when it comes to mandated salary increases. First, is the classification of your employees. Are you sure that your salaried employees actually meet the job criteria of the position? The FLSA offers very clear details on what defines a “salaried” employee. Check these carefully to ensure you have everyone classified correctly.

When the previous ruling seemed imminent, we worked with a client that thought they had everything under control. After examining the solutions they prepared for their five-member payroll, we were able to propose an alternative option that saved $16,000 a year. It’s easy to make mistakes if you aren’t aware of all the implications a proposed new rule could have on your individual situation.

What Should You Do Next?

The HORNE team knows that this task can be daunting, but if you start planning now, you can make the best choices for your business. We’ve broken the process down into three steps to help you take control:

• Identify Your Impact – Start by identifying employees who are currently classified as exempt but who would not qualify under the $35,308 threshold. Now might also be a good time to review the job duties and tasks that are required of every exempt employee because these requirements have not changed. Ensure that all your exempt employees actually qualify for exempt status.
• Weigh the Solutions – Raising the salaries of affected employees may be the most straightforward solution to complying with the proposed rule, but it may not be the best solution. You can project the impact on the bottom line of your company through forecasting tools. HORNE can help you look at all aspects of a proposed change to help find ways to mitigate costs and decide on a course that is right for you.

There are numerous options to consider related to compensation and possible staffing changes. Each solution has pros and cons, and you must determine what’s best for your business.

• Implement and Communicate – When you’ve decided the best strategy for your company, having an implementation strategy is the next step. You will have a significant responsibility to communicate the change to your employees effectively. They may be concerned and resistant initially, but you can help make any transition smoother by involving your employees in the process as much as possible, as early as possible. There may also be process changes to consider – ignoring these could lead to issues once any changes become effective.

If you’d like to discuss your situation with our experienced team, please give us a call.

We are continually monitoring the situation and will keep you up-to-date on any regulation changes.