Are You Doing Business in the U.S.?
Get Ready Now for the New Overtime Rule
The Department of Labor (DOL)’s new overtime rule is big news for employers and employees, alike. While the revisions don’t take effect until December 2016, employers are taking action now to ensure compliance with the new overtime rule and keep labor costs under control.
Ensure Compliance with the New Overtime Rule
The DOL recommends four options for employers impacted by the new overtime rule1:
- Pay time-and-a-half for overtime to salaried workers who meet the duties tests but earn less than $47,476 per year. While it sounds straightforward, this option will require employers to accurately track work hours for these workers—which you may not have been doing up to this point.
- Raise salaries for employees who meet the duties test and who currently earn close to the new salary level to push them above the new overtime threshold of $47,476. This approach would allow these workers to remain ineligible for overtime pay under the new overtime rule.
- Limit workers to a maximum of 40 hours per week.
- Apply a combination of the above approaches.
Choose the Best Approach for Your Organization
As you consider the puzzle of options available under the new overtime rule, be sure to look at compliance and strategy in tandem. The following tips will help:
- Consider the long-term costs. Capping employee hours at 40 is one way to minimize overtime costs. However, depending on the type of work being performed, you may need to hire additional workers in order to maintain productivity—causing your total labor spend to increase more than the actual cost of paying workers time-and-a-half for overtime. So you have to look at the calculations to see what works for your organization.
- Gather metrics. Organizations with employees in the U.S. need to demonstrate compliance with the new overtime rule by December 2016. Use the time between now and then to track hours for impacted workers and see which approach makes the most sense financially—particularly if you’re trying to decide whether to pay overtime or increase salaries, either across the board or for specific employee groups. And if you have work-hour data for prior months already, you can analyze an even larger set of metrics to help you determine the best course of action.
- Take a strategic approach to scheduling. Another way to minimize overtime costs is to put smart, employee-friendly scheduling tools to use across your organization or for specific employee groups. According to Aberdeen Group, automated scheduling reduces overtime costs by 19%, on average, and drives unplanned or unbudgeted overtime down by 7%2. These savings are accomplished by digitalizing workforce scheduling processes. For example, allowing managers to apply multiple criteria—such as labor cost, skills, and availability—when creating schedules or filling last-minute callouts. Other strategic moves include allowing employees to indicate availability and scheduling preferences and/or swap shifts with qualified coworkers—all of which can help you reduce unplanned absences, and therefore lower your organization’s dependence on overtime.
Partner with Experts
As you prepare to demonstrate compliance with the DOL’s new overtime rule, consider whether your organization’s current time and labor processes are sufficient. Whether you need to expand your organization’s time tracking capabilities in order to meet the new demands, or you’re looking to take a more strategic approach to minimizing overtime costs across through workforce scheduling, we can help. To learn more, access your copy of Maximize Your Workforce Management ROI, an Executive Perspective from WorkForce Software.
1 U.S. Department of Labor, “The Overtime Rule,” May 2016. (https://www.dol.gov/featured/overtime)
2 Aberdeen Group, “Bottom Line Reasons for a Total Workforce Management Strategy,” Dec. 2014.