The New Overtime Rules: How Does This Affect Your Business? (2/3)

In part one of our three-part series “The New Overtime Rules”, we detailed the Department of Labor’s new proposal for salary thresholds and overtime eligibility. Today in part two we’ll be covering some of the ways this proposal could impact your business.

The U.S. Department of Labor’s long-awaited proposal for overtime pay requirements is now available to the public, and employers have begun cautiously reviewing the new rules to gauge what lies ahead. Originally attempted in 2016, the previous changes were blocked by a federal lawsuit, making the current proposal the first potential changes since 2004. Placing the new threshold at $35,000 per year (or $679 per week) up from $24,000, the new regulations would make over a million more workers eligible for overtime pay.

If this proposal takes effect, businesses both large and small will have to contend with some big changes – whether they like it or not. All businesses can prepare themselves by understanding the impacts this proposal will have on employee compensation, corporate policies, and overall business costs:

1. Employee compensation. Exempt employees making under $35,000 a year will be subject to some employer speculation, torn between two options: reclassifying these employees as non-exempt from overtime, with the obligation to track their hours, or give employees already paid close to $35,000 a raise, thereby keeping them exempt. Optional benefits such as disability and dental insurance may also be up for debate, as businesses reevaluate whom to provide new and potentially costly benefits.

2. The perils of pay compression. Reclassifying an employee as exempt by raising their salary may seem like an easy choice, but there are numerous implications to consider. Exactly how many employees should receive a raise to meet the new regulations? Will employees previously making above $35,000 require a raise as well? And what of those employees remaining just below the ideal salary to receive a raise? Due to pay compression tactics, friction between employees could easily arise and affect work quality, relations, and more.  

3. Employee morale and internal regulations. Businesses will assuredly seek out ways to evade the pain points of the new policies, including restricting workers to eight-hour shifts, or giving a raise to some employees to avoid paying more in overtime. However, when an employer is completely absorbed in protecting the company at all costs, they may neglect how these changes can affect employee morale. Some workers may feel resentful of their new status, or misread the situation –  assuming that the new changes are based on performance, and not federal regulation.

4. Remote and traveling employees. Remote employees now dominate the global workforce at a whopping 80% – and with all its advantages, it may also present some risks under the new proposal. It can be difficult to accurately track remote employee time, and frustratingly easy to overlook.

5. Employee time & attendance. With over one million U.S. workers switching to non-exempt status, accurately tracking their time will be of the utmost importance. Businesses still depending on manual processes will face an overwhelming transition with each worker soon to be below the new salary threshold. The overarching question remains who to transition – but this must be based on a reliable record of time, giving insight into current overtime habits and pay. Without an accurate, easily retrievable record of tracked time, how can an employer decide the best way to direct a newly non-exempt employee’s schedule?

With the public notice-and-comment continuing until May 21st, the new proposal will be undoubtedly subject to further debate. In this case, there is no such thing as too early – businesses can prepare themselves by understanding these potential impacts, and diligently evaluating, planning, and executing the right systems and processes now, so they may be in place if and when the overtime upheaval goes into effect.

Next up, the final post in our three-part series. Now that we’ve discussed the changes and what they could mean for your business, our third post will discuss the best practices to approach these potential changes – and how you can stay on top of the game.

Read the Series:
Sara Longini
ABOUT THE AUTHOR
Sara Longini
Sara works in Content Marketing and Social Media at Replicon. Replicon provides award-winning products that make it easy to manage your workforce. With complete solution sets for client billing, project costing, and time and attendance management, Replicon enables the capture, administration, and optimization of your most underutilized and important asset: time.
Get started today.
Set up a free trial based on your business needs. Start Free Trial

6 Ways to Simplify Remote Resource Allocation and Why It Matters

When you’re an enterprise operating at a global scale with a team of employees working from home, one of your major concerns is proper resource allocation. When it goes wrong,…Read More

3 Ways to Grow Your Services Firm Profitably

Does your professional services organization deliver? When you provide services to paying customers, how, when, and what you deliver are your top priorities. Think of it this way: if you…Read More

The Future of Project Resource Management in Professional Services

When it comes to PSA, automation is (literally) the name of the game. We turn to machine learning and AI to make our processes easier and cut down on the…Read More

Miscalculating wages by a few cents led to this company paying a six-figure lawsuit

West Marine Products, which operates a chain of retail stores across the United States specializing in boating supply and fishing equipment, recently settled a class action lawsuit involving 707 former…Read More

Employee time tracking is dead

iBeacons, Bluetooth Low Energy, Proximity sensing and the obsolescence of time tracking as we know it. Businesses have to track the time their employees work for a variety of reasons,…Read More

How Sarbanes-Oxley Impacts HR Departments

Ever since the Sarbanes-Oxley Act (SOX) was passed in 2002, following a spate of high-profile corporate scandals, companies have had to take a wide range of precautions to ensure that…Read More
  • Polaris
  • Time & Project Insights
  • Time & Projects Solutions
  • Replicon Products
  • Replicon Users
  • Cloud
  • Corporate
  • Professional Services Management
  • Shared Services Management
  • Time and Attendance Management
  • Customer Feature
  • Time Intelligence
  • Industry News
  • Global Compliance Updates