What You Should Know About the New Overtime Ruling

Good news for employees who feel their employers are taking them for a ride by not paying them overtime.

A new Department of Labor ruling aims to level the playing field for employees who make more than $23,600 a year. As the law stands right now, those employees are not guaranteed time and a half for extra work. Employees who bring in less than $23,600 a year, however, are guaranteed overtime pay.

The Department of Labor wants to extend time-and-a-half overtime pay to all employees who make less than $50,440 a year.

Employers, prepare to adjust your labor practices because, for many employees, time beyond 40 hours a week will no longer be free. Here are some ways you can prepare for the change:

1. Ensure correct classification of employees.

You may have already heard about the lawsuits some companies are facing due to employee misclassification. Gig employers like Uber and Lyft are receiving the brunt of the war as legalists continue to examine whether workers are entitled to the same provisions employees are.

To avoid these issues, classify employees correctly and ensure how they’re paid complies with the law from the start.

The Fair Labor Standards Act (FLSA) defines two classifications of workers: exempt and nonexempt. Exempt employees don’t have to be paid overtime or receive minimum wage provisions and nonexempt do.

The FLSA defines exempt employees as follows:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week.
  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers.
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Use this criteria to determine which of your employees are exempt and which are nonexempt. Categorize employees in your payroll system appropriately so that if the new overtime ruling is passed, the transition to managing overtime for employees will be as smooth as possible.

2. Communicate with your employees about the change.

Keep employees in the loop about any changes that will be made to their schedule, should the new ruling pass. Some employees may be used to working a few hours overtime each week to complete extra work, but you might feel differently about them doing so once the new ruling is in effect.

Stay in touch with your team easily by using a communication platform on which everyone can participate in discussions. It’s important to announce updates and answer employee questions to keep everyone on the same page.

3. Use technology to help you manage employees’ time.

Because the new ruling means employee’s overtime hours can cost you significantly, you’ll want to keep a closer watch on employees’ time. Switching to digital time reporting and integrated payroll makes keeping track of that time easy.

This will allow you to pull hours directly from your timesheets into payroll to ensure accurate overtime calculation and reporting. Accurate reporting will help minimize compliance risks. Also, a system like this can help you keep track of employees’ time so you can make smarter scheduling choices.

Regardless of whether the ruling is passed or not, these practices are effective when it comes to making day-to-day management operations run more smoothly. Stay organized and communicate with your employees about your plans to meet new requirements, and you’ll be ready to face any changes that may come head-on.

What are some concerns you have about the new overtime ruling? What else do you need to do to prepare for the change? Share in the comments below!

Matt Straz is founder and CEO of Namely (www.namely.com), the all-in-one HR, payroll, and benefits platform built for today’s workplace. Namely, his third startup, closed its Series C round of funding in June of 2015. Headquartered in New York City, Namely helps innovative organizations everywhere build engaging company cultures and manage everything HR. Matt is a weekly contributor to Entrepreneur and frequently writes for several other publications about human resources, startups, and technology. Follow him on Twitter: @mattstraz.