Be prepared, not perplexed, about the new overtime pay rule

An article in the Wall Street Journal this week (paywall, subscription needed) noted that schools across the country are preparing for the Obama Administration’s overhaul to overtime pay rules.

The Labor Department has been reviewing this proposal for some time, which will help an additional five million US workers receive overtime pay by more than doubling the salary threshold for eligibility. While this rule is not confined to the higher education sector, colleges have recently been the most vocal about its impact, as that an increase in staff salaries will put more pressure on already-strained budgets. The argument is that the proposed overtime rules will make it more difficult to keep rising tuitions, student services, and labor-intensive research initiatives costs in check.

While the additional costs cited by universities sound exorbitant (for example, Vanderbilt University calculated that nearly half of its employees would be eligible for new overtime pay rules, costing an extra $7-9 million), the reality is that the salary threshold defined by the Fair Labor Standards Act has been updated only once in over 40 years. This means that people are working longer hours against a lower average salary compared to the previous generation. On the flip side, consider this: in 2013, businesses paid an average of $4.5 million to settle wage and hour cases to employees.

Rather than isolating the issue to the initial higher salary costs, businesses need to focus on the longer-term impact to talent retention, brand reputation, and wage and hour compliance. There are a litany of wage and hour requirements at the city, state, federal and industry levels – including state-specific meal breaks, industry-specific
“predictable scheduling” and federal contractor sick leave requirements.

At Replicon, we work with higher education customers including Northeastern University, the University of Pennsylvania Law School and DeVry University to support their time tracking and workforce management needs. To help our customers meet their wage and hour obligations, we have a pay rules library that monitors and updates changes to labor regulations, while our in-house team of compliance experts also provide customer support during labor regulation audits and investigations.

Does your business have the processes and systems in place to handle wage and hour reforms, or are you scrambling to address any changes that may come into effect?