The Final Overtime Rule: What Changed and How It Impacts You Presented by Kristi Weierbach, Ph.D, SPHR, SHRM-SCP, FPC [email protected] 717-757-6999 ext. 3006 Presenters
Kristi Weierbach, Ph.D., SPHR, SHRM-SCP, FPC Lois Ribner, CPA Manager, HR/Payroll Advisory Services Director, Outsourced Business Services [email protected] [email protected]
Follow me on Linked In and Twitter! Friendly Reminders -Survey -Questions New OT Rule Overview
OT will be extended to over 4 million workers within the first year.
Effective date: December 1, 2016
Automatic updates scheduled every three years, first being January 1, 2020.
$295 million employer costs over 10 year period.
https://www.dol.gov/whd/overtime_pay.htm Companies of varying size and industry will be impacted 6/9/16 – TX Foundation Repair Co. pays nearly $100k in back wages 6/9/16 – CA Restaurant pays $128k in back wages. 6/8/16 – PA Paving co. pays $114K in back wages etc. 6/7/16 – CA Recycling co. pays $90K in back wages etc. 6/2/16 – AZ Staffing co. pays more than $151K in back wages etc. Fair Labor Standards Act (FLSA)
Establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in the Federal, State, and local governments.
Department of Labor (DOL)/Wage and Hour Division (WHD) is the governing body. FLSA & Businesses
$500,000 or more in annual gross volume of sales made or business done
Hospitals, schools/pre-schools, government agencies, and businesses providing medical or nursing care for residents are covered by FLSA regardless of annual sales or business done in non-profit status.
https://www.dol.gov/whd/overtime/final2016/faq.htm#8 Poll Question #1
Does your organization meet the requirements for FLSA? Yes No Still Unsure Activities performed for a business purpose ONLY are counted towards the annual sales, such as operating a gift shop or providing veterinary services. Income from contributions, membership fees, many dues, and donations (cash or non-cash) used for charitable activities do not count towards threshold. Providing temporary shelter, clothing/food to homeless, sexual assault or domestic violence counseling, disaster relief provisions etc. do not qualify an enterprise for coverage under FLSA.
https://www.dol.gov/whd/overtime/final2016/faq.htm#8 Scenario – Non-Profit organization has a child care program that charges a weekly rate.
If the annual revenue exceeds $500K then it is required to follow the exemption rules. FLSA & Individuals
Covered if engaged in interstate commerce or in the production of goods for interstate commerce.
Telephone calls, ships materials, transports person or property to another state.
Individual working for non-profit making purchases across state lines with credit card that provides free meals to the homeless is considered covered under FLSA. If an insignificant amount of time invested then not covered.
FLSA generally focuses more attention on enterprise wide coverage for compliance purposes. Exempt vs. Non-exempt
Exempt – no premium pay for overtime is required.
Non-exempt – premium pay for any time worked over 40 hours in a work week, equivalent to 1.5 times regular rate of pay. FLSA OT Exemption - Airplane View
Salary Level Test Duties Test Salary Level Test
OLD
. $455/Week
. $100,000 annually - HCE
NEW
. $913/Week
. $134,004 annually - HCE
Salary thresholds do not apply to outside sales employees, teachers, and employees practicing law or medicine. Poll Question #2
Do you have salary exempt employees that fall in the gray zone – earning between $455 and $913 per week? Yes No Not Sure Standard Duties Test
NO changes! White Collar Exemptions Executive Professional Administrative Computer Sales
https://www.dol.gov/whd/overtime/final2016/faq.htm#8
Computer Exemption
Computer systems analysts, computer programmers, software engineers, etc.
Primary duties include:
Application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications.
Design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications.
Design, documentation, testing, creation or modification of computer programs related to machine operating systems.
Combination of the aforementioned duties, the performance of which requires the same level of skills. **Special Note – Pennsylvania does not recognize the computer exemption*** https://www.dol.gov/whd/overtime/fs17e_computer.pdf Outside Sales Exemption
Primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which consideration will be paid by the client or customer; AND
Must be customarily and regularly engaged away from the employer’s place or places of business.
**Special Note – salary requirements of the regulation do not apply to the outside sales exemption Bonuses
Historically NOT included in the salary calculation NOW – up to 10% of standard salary level if paid at least quarterly, equivalent to $91.30 per week. . Non-discretionary bonuses . Incentive Payments . Commissions
https://www.dol.gov/whd/overtime/final2016/faq.htm#8 Job Titles NEVER determine exempt status.
Salary amount alone does NOT determine exempt status. What does this mean?
Any salary exempt individual making less than $913/week ($47,476 annually) will need to receive a salary increase or be switched to hourly.
Example: Mary Adams is salary exempt and currently earns $35,000/year. Her salary will need to be increased by $12,476 per year or she will need to be switched to hourly at a rate of $16.83 ($35,000/2080).
Overtime rate $25.25
By working ~9.5 hours of overtime per week (($12,476/52)/25.25), Mary will reach the exemption threshold Extending the Scenario
4 salary exempt employees are paid $35,000 annually
Each person works 50 hours/week
The sum of overtime (10*4*52) for the year is equivalent to 1 full time employee (2080)
Choices
Increase employee to new threshold - $12,476 * 4 = $49,904/year
Pay overtime for hours in excess of 40 hours - $25.25 * 2080 = $52,520/year
Hire a FT equivalent for administrative tasks - $35,000 What else does this impact?
Employer Taxes Employer paid benefits based on salary – Life, STD, LTD insurance etc. 401k Contributions and Matching Benefit Open Enrollment Regular Rate of Pay
Used for calculating overtime for employees who are paid at different rates or receive different types of earnings (i.e. non-discretionary bonuses, tips)
Regular rate = average of rates
Overtime = Regular Rate X 1.5
Example: Cashier normally makes $10.00/hour but works an extra shift as a night supervisor, a position that normally pays $15.00/hour. Overtime rate equals $18.75 ($12.50*1.5). Action Plan
Review current workforce and identify any salary exempt employee who earns between $455 and $913 per week. Do all current exempt employees meet the duties test?
Review/Update Job Descriptions
Compensation Analysis
Adjust work schedules/workloads
Salary Adjustments
Employee Communication
Evaluate Time & Attendance Solution Executing the Plan
Does your staff have the necessary skillset?
Do you have the required time, resources and tools available?
Accountability Poll Question #3
What do you believe will be your biggest obstacle with the new OT rules? Time and Resources Communication Managing overtime hours Other Timeline – preparing for 12/1/16
12/1/16 Salary 11/1/16 Adjustments Employee Communication 10/1/16 Conduct Compensation Analysis and Decision Making 9/1/16 Process Review/Update Job Descriptions
8/1/16 Identify Gray Zone EE Time Commitments Estimated Hours for Completion
Review Workforce – 15 min to 1 hr.
Review/Update Job Descriptions – 30 min. to 1 hr. per job title.
Compensation/Benefit Analysis – 8-24 hours
Work schedule/workload and salary adjustments – 1 hr. to 8 hrs.
Employee Communication and Questions – 2-4 hours
Evaluate existing Time & Attendance Solution – 1-4 hours.
Evaluate new Time & Attendance Solution – 16-40 hours
Training for new non-exempt employees – 1-3 hours ***Time requirements most likely will be in excess of 40 hours*** Employee Communication
Employee Perception Assume employees will talk Provide at least 30 days out Prepare for Questions Frequently Asked Questions
. Am I allowed to pay additional money to a salary exempt employee who works in excess of 40 hours?
. If an individual qualifies as an exempt employee, can I pay him/her hourly instead? Frequently Asked Questions (cont.)
Do I have to pay non-exempt employees who use their laptops at home to check email?
An employee comes in earlier than their scheduled shift, do I need to pay him/her? Upcoming Events
7/21/16 Webinar - Working Smarter, Not Harder: The Top 5 Benefits of Outsourced Accounting
7/28/16 Webinar – HR Architecture: Tips for Managing FMLA, Workers Compensation, and Paid Sick Leave
8/25/16 Webinar – HR Architecture: Employee Offboarding – Staying Out of the Hot Seat
9/29/16 Webinar – HR Architecture: HR/Payroll Fall Cleaning
10/27/16 Webinar – HR Architecture: Fringe Benefits – I Must Do What?
Nov/Dec – Annual Year-end Seminar