Human Resources and Payroll Departments need to prepare now for the proposed Fair Labor Standards Act (FLSA) changes that are anticipated to be announced in July.
These proposed changes include raising the minimum salary threshold to $970 a week, or $50,400 a year. Currently, the threshold is $23,660 per year or $455 per week. What this means for employers is that anyone not at or above those new levels must be paid overtime.
The FLSA applies to nearly all businesses, including small businesses and not-for-profits. The Act covers minimum wage, overtime, and child labor regulations.
Over the years, there have been small adjustments and a few amendments. This is the first major change in more than 10 years.
Because these changes are changes in regulations, they are proposed and announced to the public for comment. That took place in 2015 and the Department of Labor received nearly 300,000 comments.
The department is expected to announce the final regulation in July. Employers will then have 30-60 days to implement the new regulations. This short timeframe is why employers must prepare now!
Employers should review all employees that are currently exempt and make less than the new salary threshold. If the position is exempt under the current duties test, the salary will need to be raised to the new threshold or the employer will need to start paying overtime.
A careful analysis should be conducted as to the cost, the impact on the organization, the amount of overtime obligation, and the value to the organization of the position. The position may not be worth more money and a significant increase may alter the internal equity of positions in the company.
If the position becomes non-exempt, you have to determine the new hourly rate. Because of the overtime factor, this isn’t a simple calculation.
You must also review other employee salaries in the company to make sure that your pay is fair and equitable. Keep in mind that your exemption status needs to be by classification. You can’t have a couple of employees exempt and a couple others non-exempt if they are doing the same job.
You may want to look at staffing levels and job design to minimize overtime expense. This is a good time to update job descriptions and have discussions about ways to automate and make your operations more efficient.
At minimum, if your costs are going up, you need to review your business model and pricing and increase your prices accordingly. Don’t dilute your profit margins by absorbing the additional costs.
The most important area for planning is communication. Employees are resistant to change, especially employees that are proud of their exempt status. This will be hard for them. They will have to report time and they won’t have the flexibility that exempt status has provided.
Be aware of these attitudes and feelings and address them. A communication strategy is very important. Utilize human resources consultants or your legal team to minimize your risk.
As CEO of Dynamic Corporate Solutions, Suzi has been offering practical and creative Human Resources solutions to businesses from Fortune 50 giants to small local enterprises.
About DCSI: Dynamic Corporate Solutions, Inc. is a Human Resources Consulting Management company in Northeast Florida. Clients range from small businesses to Fortune 50 companies and include for-profit and not-for-profit organizations.
DCSI offers HR Consulting Services, including, Free HR Essentials Workshops, The HR ToolKit® and HR Helpline subscription, as well as traditional staffing, RPO, and recruiting solutions via Idea Staffing. DCSI recently launched an FLSA Navigation guide that assists in the critical steps to comply with the provisions of the change.