The Unicorn HRO Blog

What Human Resources Staff needs to know about new overtime rules

Posted Tuesday, August 16, 2016 by Unicorn HRO

In June of 2015, the Department of Labor released new rules relating to the salary threshold for overtime pay, which go into effect on December 1, 2016.  Under these rules, salary-based employees who make less than $47,476 per year must be paid overtime if they work past 40 hours a week.  This makes many more employees (including managers and professionals) eligible for overtime pay, and presents a major challenge for HR staff at the companies where these employees work.  Below is information that all HR staffers need to know about these new overtime rules and how they work in order to stay in compliance with government regulations.

Preparing for the change in law

As a result of this law, HR staff needs to start making immediate preparations to be compliant with this new legislation, as it will almost certainly affect staffing and budget plans for companies.  HR staff need to take measures such as auditing the work hours of employees who make less than $47,476 annually to see if they are working more or less than 40 hours a week.  In doing so, Human Resources can see who is eligible for overtime and who is not.  As the law also updates the salary threshold for overtime eligibility every three years, HR needs to calculate what this will mean for their company’s long-term budget and plan accordingly to make sure they remain in compliance.

Whether or not to pay overtime

The new overtime rule presents employers with a few options (or a combination of those options) on how to comply.  Employers, should they find it financially feasible, can pay time and a half for any overtime work performed.  This works best for an employee (or employees) whose workload remains constant at 40 hours per week, and who might only occasionally work beyond that amount of time.  If this is the case, then HR can calculate, plan and budget extra pay for those times.

Employers also have the option of raising the salaries of their employees to the level of exemption from the overtime law.  This would be the best option for employees who regularly work more than 40 hours per week.  Employers and HR staff should note that they do not have to take only one option to be in compliance, and can apply a combination of these options depending on which employees have worked more or less than 40 hours per week.

Alternatively, employers can set a 40-hour work week for all of its employees so that they do not have to pay overtime, simply paying the same salary as before the law goes into effect.  For some, this could be a less preferable option to take, as many employees might feel that their time at work feels more regimented, and that they have less autonomy and flexibility in the hours they work.  To offset this, HR staff should consider communicating such a change as a positive one, giving structure to workers and allowing them to more easily plan a work/life balance (employees, for example, would not be expected to do work outside of work hours, such as phone calls or email correspondence).

By getting started now on planning for how their company will approach new overtime rules, HR staffers can effectively communicate changes to employees, budget for how the company will deal with these changes, and keep in compliance with the new rules with minimal disruption to day-to-day business.

 

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