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[Checklist] New Overtime Rules: Is Your Business Ready?

New overtime rules may have a lasting effect on how you pay your employees. Here's a quick checklist to help you develop a plan to address any issues.
New overtime rules checklist

New overtime rules have been released. According to recent research conducted by Paychex, 20% of business owners stated they weren't aware of the prospective rules changes and 55% of business owners didn't believe their business would be affected. The US Department of Labor issued the Final Rule and estimated that it would impact as many as 4.2 million American workers and their eligibility for overtime pay. The rule raises the salary threshold for certain salaried white-collar exemptions (including executive, administrative and professional) to qualify for exempt status under the Fair Labor Standards Act.

The new salary threshold for executive, administrative and professional white collar exemptions is indexed to the 40th percentile of the weekly earnings for full-time salaried workers in the lowest income Census region (currently the South). On December 1, 2016, the threshold will increase from $455/week ($23,660/year) to $913/week or $47,476/year. It will be updated every three years, beginning on January 1, 2020.

In addition, the total annual compensation requirement needed to meet the highly compensated employee (HCE) exemption will increase from $100,000/year to $134,004/year, equal to the 90th percentile of the weekly earnings for full-time salaried workers nationally.

While the DOL published the Final Rule in the Federal Register on May 23, the provisions will not take effect until December 1, 2016

Employers with employees who may be affected should take the initiative now to evaluate the company’s standing, look at how different scenarios will impact their bottom line, and determine how they will move forward to best avoid wage claims and other issues. As a result, it's important that businesses understand the new regulations and how they may impact their business. Here is a quick checklist to help you prepare.

[  ] Determine the Final Rule's Impact on Your Business

Be sure to familiarize yourself with upcoming changes to your overtime situation by reviewing the new overtime rules.

[  ] Conduct an Audit

In partnership with your payroll provider or compensation specialist, conduct an audit of who is likely to be affected. Consider beginning with a basic audit of your current staff, exempt status, and compensation levels.

[  ] Develop a Plan

Look at your historical overtime payments and determine whether your costs are likely to increase due to hours worked. Conduct some scenario planning with your advisors. Should you increase your budgets for essential staff? Should you consider hiring more staff or revisiting your compensation model for specific employees? By looking at the impact of the new rules on your financial picture, you'll be in a better position to take action most appropriate for your company.

[  ] Look at the Impact of Technology

The right time and attendance software can help you stay in compliance with overtime regulations. Back pay—as well as penalties and fines—can be very expensive, even when it's an unintended mistake. The right technology can help. Time and attendance reporting systems help eliminate the error associated with manual time entry. It's possible to enable workers to enter time via kiosks, mobile devices and more. Finally, managers can set up real-time alerts and have constant visibility into time-related issues before they become costly problems.

With a short horizon after the announcement of the Final Rule to comply with the new overtime rules, companies should start planning now. When in doubt, consider working with a professional HR or compensation partner that can help you understand the potential impact and your options moving forward.


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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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