A full three years ago we wrote a blog about the upcoming changes to the overtime regulations outlined in the Fair Labor Standards Act. Those changes later got delayed and further modified, but now they’re set to go into effect on January 1, 2020.
Is your organization ready for those changes?
The most important thing we can say about these new regulations is this: Don’t make assumptions. Don’t think, “Oh, we’re a small employer, so it won’t really be a big deal for us.” We’re constantly talking to our clients about risk and weighing good risk versus bad risk. Violating federal employment regulations is a bad risk every time, and you don’t want to delay being in compliance with these new FLSA regulations.
The specifics of the new regulations have changed a bit since 2016, with the minimum pay threshold for exempt workers being one of the biggest revisions in that timeframe. Here’s what you need to know about bringing your company into compliance.
Identify your exempt and non-exempt employees
The FLSA basically says that employees must be paid time and a half for any hours they work beyond 40 hours in a week. But, as with many things, there are exemptions to the rule. So the first step is to identify which employees are exempt from FLSA (and don’t get paid overtime) and which employees are non-exempt (and thus do get paid overtime). Check out our previous blog on that exact topic, though ignore any threshold numbers listed since those have changed. With the 2020 regulations, the minimum salary threshold is $35,568 per year. There are also exemptions based on specific roles and job titles, which you can read in detail on the Department of Labor website.
Assess any changes needed to specific roles
The previous minimum salary threshold was $23,600 per year. It’s now $35,568, which means you could have employees who were classified as exempt before but will become non-exempt when the calendar changes to 2020.
How do you handle that? First, look at your employees who qualify as exempt based on job duties but make less than the new minimum threshold. You could increase their base pay to retain their exempt status, or you could keep their pay where it is and begin paying them overtime.
The biggest question is how much overtime do they work in a year? If the answer is none or only a few hours here and there, you’re probably safe to leave their pay where it is. But if they’ll ending up working lots of overtime because of their responsibilities in your company, you could end up paying them more than if you bumped their salary up to meet the new minimum threshold.
Communicate clearly to your employees
It’s a math equation, but it’s a people equation too. Be sure you’re meeting with employees and helping them understand the new regulations and how they impact both the company and each individual employee.
When you start changing one person’s salary but not another’s, you will probably take a hit on employee morale. The person whose salary didn’t change may feel hurt or like the company doesn’t value their contributions, so proceed with caution when it comes to how you make these changes and how you communicate them. Even if the actual pay for an employee doesn’t change, they may feel that shifting from salary to hourly is a demotion.
Compliance matters with new FLSA regulations, but so does culture. Start talking with your employees now so they’re not surprised when changes go into effect in January.
Need help communicating the FLSA changes to employees or analyzing the changes you might need to make? Contact us today to set up an appointment.