The Scandinavian Way: How to Apply the “Less Work, More Productivity” Mindset to Meeting Your Goals
A few years ago, Sweden was in the headlines for experimenting with a six-hour workday.
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In the United States, most jobs are governed by the Fair Labor Standards Act (FLSA), which classifies workers into two broad categories: exempt vs. non-exempt. Under the FLSA, non-exempt employees are entitled to overtime pay. Whereas exempt employees receive no overtime pay. This is regardless of how many hours exempt employees work.
Understanding the difference between exempt and non-exempt employees will help you determine the necessary calculations. Like how much salary one would receive or pay as an employee and employer, respectively. Misclassification between the two will not only result in substantial fines but will also not allow you to accurately estimate the cost of their efforts. Therefore, let us understand the key differences between exempt and non-exempt employees.
Simply put together, an exempt employee is the one who is not eligible to receive overtime pay, no matter how many hours he/she works over and above the usual 40-hour workweek. Exempt employees are also not eligible for the minimum wage laws, as per the FLSA.
The Fair Labor Standards Act, as of January 1, 2020, mandates that any employee who is getting a fixed salary and earns a minimum of $684 per week or $35,568 annually, will be an exempt employee. However, every state has its own state labor laws.
The biggest advantage of being an exempt employee is the assurance of receiving a secure and constant paycheck at the end of every pay cycle. Exempt employees are eligible to receive retirement benefits like pension, healthcare insurance, paid vacation time, sick leaves, etc. However, the downside of being an exempt employee is that they are not eligible to receive overtime payment, even if they work extra-long hours to complete the task assigned to them.
An employee who is eligible to receive the overtime pay, as per the provisions of the FLSA, for all hours worked beyond 40 in a workweek, is a non-exempt employee. Employees who come under this category of employment need to be paid at least the federal minimum wage as per the FLSA or State law for each hour they work. The employee should be given overtime pay. This overtime pay is one-and-a-half times more than their hourly rate for any number of hours they work beyond 40 hours each week.
Under the FLSA, an employee is non-exempt if he/she earns less than the weekly minimum wage of $684.
This sounds straightforward, but the FLSA has a number of exemptions when it comes to overtime pay and minimum wage requirements. These include white-collar exemptions for administrative, executive, and professional employees, computer professionals, and outside sales employees, as well as the highly compensated workers exemption.
To understand if an employee is exempt or non-exempt, you’ll need to review the following three tests:
Classifying employees as exempt or non-exempt has been a hot topic lately, and a particularly fruitful area for lawsuits – contributing to 17 percent of wage and hour litigations since 2007. With the new overtime rules and the recently released sick leave mandate (applicable in a number of states and cities), businesses will need to consider multiple factors when it comes to reassessing, and possibly reclassifying their workforce.
There are a number of other approaches that businesses must consider as a part of the holistic people, process, and technology approach to effective employee classification. Below are four critical tips for successfully managing exempt vs. non-exempt employees.
The FLSA does not prohibit the tracking of exempt employees. In fact, the Department of Labor states that employers can require exempt employees to work in a specific shift and/or track their hours without affecting their exempt status. For example, Illinois (a jurisdiction with work time requirements) requires employers to keep a record of exempt employees’ hours worked. It is recommended that exempt employees are tracked separately from non-exempt employees.
No matter how many hours an exempt employee works, their salary should in no way be dependent on the hours that they work. If their hours affect the salary, and the salary fluctuates based on this, then the employee will no longer be considered exempt.
If a company needs its exempt employees to work in a particular shift and track their hours, then the company’s corporate policy needs to make sure that employees are not non-exempt. The best approach is to show that these additional requirements are part of the employee’s job responsibilities. They need to work specific hours to perform their managerial, professional, executive duties effectively. For example, shift supervisors need to work in the same shift as the employees. They are expected to oversee (and thus, should track their hours), but can still be considered non-exempt.
Businesses should involve all parties affected by the new rules, ensuring everyone understands the changes. In addition, they should also understand the implications to employee management, morale, and compensation. As part of the communication process, it is important to conduct training. The training will help employees – particularly those in managerial roles – ensure that they can play an active role in unveiling the changes to the business. Changes to wage and hour regulations can have unintended consequences (such as these additional business costs), so engaging the workforce on any updates is crucial.
While reclassifying, increasing the salary threshold, or limiting overtime hours may seem like clear options to tackle the overtime rule changes. There are numerous considerations from a business, technology, and legal standpoint.
Staying in compliance with the latest, and all legal regulations that touch your company and operations is not an easy task. It is a must for everyone who doesn’t want to face the consequences of non-compliance. Besides, non-compliance with FLSA regulations can be very expensive.
If you don’t adhere to the FLSA regulations, you could be legally accountable for back payments to employees as well as penalties, and/or illegal trials:
FLSA laws are nuanced and complex, therefore organizations need a solution that can automatically help in complying with FLSA.
One of the biggest causes of non-compliance with employment laws is inadequate or inaccurate time data. This can easily lead to payroll errors. Using an automated time-tracking solution, like Replicon, will help:
Replicon offers employee classification capabilities and helps you apply different pay rules and pay codes to different employees. This makes it easier to pay your employees correctly as per the FLSA guidelines.
Here are some features that you get with time intelligence software:
In Replicon, you can manage exempt and non-exempt employees in default permission profiles. Assigning an “exempt” permission profile gives the employee a standard format timesheet. However, assigning a non-exempt profile gives the employee an “in-out” timesheet. Replicon provides a library of predefined pay rules for each US state, Canadian province and territory, and many other countries. Our platform creates and constantly updates these rules based on the labor laws of each jurisdiction.
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A few years ago, Sweden was in the headlines for experimenting with a six-hour workday.
It’s a scenario in every professional services firm across the globe.