5 Things to Do to Help with Overtime Costs
A change in the Fair Labor Standards Act is about to turn your payroll, and planning, world upside down.
Update: On June 29, President Obama announced plans to raise the overtime threshold to annual wages of $50,440 in 2016.This story has been updated to reflect the proposed change.
If you’re an entrepreneur or executive who juggles pay and hours to avoid extra costs, there’s a big bump in the road coming, as consultant Fran Sussner Rodgers wrote in the New York Times. President Obama’s proposed change to the Fair Labor Standards Act released Tuesday will mean that suddenly many more people will be legally mandated to make time-and-a-half for hours worked over 40 a week. That means if you’re running a company, you’ve about run out of options and need to face reality and get a lot more efficient with your planning and operations.
For many years, employers have tried all sorts of hiring tricks and dodges to avoid regulatory demands and restrictions and reduce costs of operations, including the following:
- By advertising for “digital natives” or recent grads, companies try to employ age discrimination in hiring.
- Cutting the amount of available hours for hourly employees and placing them on part-time status lets many companies avoid offering health care insurance as required by the Affordable Care Act.
- Many companies have found themselves facing lawsuits for allegedly break labor laws about hourly pay, whether unintentionally because their accounting systems aren’t sophisticated enough or through such acts as not clocking people in and out during the hours their actually required to be on duty.
One long-used dodge is classifying people as being salaried workers rather than hourly. Companies hope to avoid all the messiness of tracking actual hours and, more importantly, the expense of overtime when they require employees to work longer than 40 hours. According to the law, someone must be paid $23,660 a year minimum to sit above the overtime requirement, or at an hourly rate of at least $27.63 if an exempt computer employee.
That trigger point is about to change significantly. According to Rodgers, sometime in July that number will likely double — at least. Anyone making less than the minimum will be legally entitled to time and a half pay at their effective hourly rate for work beyond a 40-hour week. Depending on your business and staffing model, you could be heading toward a big financial impact. You’ll either have to give employees a possibly large bump in pay or learn to deal with them as non-exempt employees.
The problem for many businesses is inefficiency. They schedule endless meetings that don’t accomplish much, or remain understaffed in the hopes that employees will work longer hours, letting them avoid adding headcount. Time to reevaluate how you run a company.
Reconsider how you use meetings
Efficiency sounds great, but it’s not just for individual employees. Executives and managers must realize that when you ask people to work beyond a certain amount, even if you have to pay time and a half, you’re asking them to sacrifice other parts of their lives for your benefit. Be smart. Cut the number of meetings and reduce the length by being better at arranging and running meetings. Before you squeeze another meeting in at the end of the day, ask yourself if it’s so important, why not run it earlier? Are you willing to pay to keep people around? If it’s not worth paying them, maybe it’s not worth doing.
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