The first major changes in federal overtime rules in over a decade took effect on the first day of 2020 – and most businesses still aren’t ready. On January 1, 2020, 1.3 million more American workers became eligible for overtime pay under the Fair Labor Standards Act (FLSA). The new salary threshold for overtime exemption is $684 per week (equivalent to $35,568 per year for a full-year worker) – meaning anyone who earns less than this becomes eligible for overtime, regardless of the job.
To say this will have an impact on American businesses across industries is an understatement, but here’s where it gets tricky: many states have overtime regulations that are different from the new federal overtime rules.
For example, in Maine, the state’s minimum salary for exemption from overtime eligibility—which is tied by statute to Maine’s minimum wage—is set to rise from $33,000 to $36,000 per year. This translates to a minimum salary of $692.31 per week, much higher than the new national standard. In order to navigate these discrepancies after they come into effect, businesses will need to look inward and ensure they adhere to three universal guidelines going forward.
1. There’s No Place for Vague Job Descriptions
Human resources departments and managers alike spend much of their time defining the roles of their employees. However, a recent study by Gallup shows that nearly half of all U.S. employees don't know what's expected of them at work with regard to actual duties. Because both national and state overtime rules set exemption requirements based on job duties, many companies are in the process of removing the fluff from roles and responsibilities documents and nailing down their current exempt employees' actual job duties. The lesson learned? Get ahead of regulations like this and avoid scrambling by ensuring job descriptions are as detailed as possible.
The most impactful way to go about this is to make it an exercise that reaches all the way from middle management to the C-suite, in order to ensure that multiple perspectives go into defining these descriptions. On an ongoing basis, leaders must inspect organizational processes around classifying workers as exempt to ensure they’re up to code from a compliance perspective. Akin to preparing for GDPR in the UK, these are lessons many business leaders learned as they scrambled to prepare for these regulations to take hold.
2. Pay Attention to Your Deskless Employees
Deskless workers now comprise 80% of the global workforce, and 78% of open roles posted since 2016 claim some form of flexible work options. However, along with the increased flexibility that these arrangements provide, the potential to overlook their time and activities has increased as they have grown in number. The new overtime pay rules have already required employees across industries to re-jigger their remote-work policies to better keep track of hours, but this doesn’t need to mean removing the flexibility the workers desire (which ultimately drives engagement and happiness in the workplace.)
What it means going forward is taking an active role in weighing the cost of additional overtime pay versus raising deskless employees’ salaries. For example, if an employee earns a base salary of $32,000 and consistently receives $4,000 to $7,000 in overtime payments, it may make sense to bump their salary over the $35,568 threshold.
3. Streamline Your Time Tracking Tech
Just as GDPR taught UK enterprise leaders that the devil was in their data, the biggest lesson the prep for these new FLSA regulations taught organizations in the US is that it is time to focus on more than just non-exempt time tracking – but on implementing better workforce management tech infrastructure. Why? To give greater flexibility to shift-based workers, accurately track accrued PTO, and inform businesses on any wage and hour discrepancies. Accurately tracking the hours that people work will be more important than ever, and any company still relying on manual processes will fall far behind the industry standard very quickly.
The best strategy is to ensure that time tracking program is integrated into a company’s workforce management suite, which is also integrated with payroll. Doing so will ensure compliance with regulations, save time, reduce costs and drive higher productivity, especially if the workforce management technology is mobile-first and cloud-based software. If a company still does not have a workforce management strategy in place, the lesson learned is that it is now more crucial than ever to invest in one as rules and regulations as well as the bridge between schedule and payroll is becoming more important than ever.
Ultimately, workforce management will carry more weight for companies as they move into a new era of overtime law. My advice? Invest in best of breed workforce management technology now, to avoid paying for additional cracks in operations structure later as additional state and federal ordinances around wage take shape in the next decade.