New Rules: Redefining Overtime
On Tuesday afternoon the Department of Labor released its final rules on overtime as a part of the Fair Labor Standards Act, which will go into effect on December 1. The basic gist of the rules is that anyone working 40 hours or more per week at a salary of less than the threshold amount is now eligible for overtime. The salary threshold of $47,476 is slightly lower than what had originally been proposed, but still impacts over 4 million workers. And it is nearly double the previous salary threshold, meaning that detailed tracking of hours worked will be more important than ever for most organizations. So what does this mean for employers, employees, and HR technology? Here are a few thoughts.
Employees – there are a couple of possibilities for employees. For some it may mean that time in half will be paid and their weekly paychecks will be impacted immediately when the rules go into effect December 1. For working the same hours that they were before, their paycheck will get bigger. However, they may not see much of a change in their paycheck, but see a reduction in hours as organizations seek to avoid not only the overtime threshold, but also the possibility of being required to provide benefits under the Affordable Care Act (ACA). And some may see a cut in both pay and hours if organizations go to a strategy of keeping everyone under the cap, though this strategy may have other repercussions for organizations.
Employers – if employers weren’t already prepared to be tracking hours and handling reporting for ACA, they had better be ready now. Organizations that offered benefits to their full-time workers were in compliance with ACA roles, but if the salaries for those workers are below the thresholds or near them, they will now need to start tracking hours and reconsidering pay policies for these full-time workers. Organizations also have to carefully consider how their strategy for handling the overtime rules may impact their employer brand. It’s a situation where it may be easy for companies to be penny wise and pound foolish, scrimping on overtime for current employees but making it harder to recruit future employees.
HR Technology – no matter what strategy organizations undertake, they will need technology to help provide them with the data and information to make informed decisions. And they will also need technology to help them communicate around these decisions. The first part is likely to be the more common approach, and it will be important for organizations to have the time tracking capability and the analytics capability to model and forecast the implications of their decisions around the new overtime rules. But no matter what those decisions are, using the right tools and strategies to communicate to their workforce the impact of this decisions will be of critical importance as well. Expectations are everything – even if the information is disappointing, it’s better if it’s not a surprise. (As an aside, the Department of Labor website on these changes is quite well done and features an extremely informative video – a great example of the type of communications I have been discussing recently.)
The last decade has seen some of the most sweeping changes to labor regulations in history. We will need to see even more in the coming decades as the shift continues to a gig economy and freelance labor market. Employers, employees and HR technology will all be challenged to keep up, and keep the lines of communication open.