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Why Your Overtime Expansion Plan Is Worth a Second Look

The information in this blog post refers to the proposed and final rules published by the U.S. Department of Labor in 2015-2016. To see the most recent information, click here.

The U.S. Department of Labor’s overtime expansion rule is expected to go into effect on Dec. 1, requiring employers to meet an increased salary threshold, which — for most exempt employees — renders them ineligible from receiving overtime pay. Although the Fair Labor Standards Act (FLSA) impacts almost every business and business owner nationwide, some employers may believe that simply cutting a few hours will help them avoid increased labor costs and noncompliance penalties under the new rule.

But, because the salary threshold’s increase is so dramatic, the law is complicated and the consequences of noncompliance can be devastating, many businesses could require huge changes to stay in line.

Some of those changes may include:

  •  Tracking overtime and catch-up payments per the new 10 percent provision
  • Creating and communicating policies to newly nonexempt employees on how to utilize their mobile phones to track work completed after hours
  • Empowering managers to recognize noncompliance risk in everyday situations

What’s more, it only takes one employee filing a claim with the Department of Labor to have just cause for investigation.

In 2015, a record 8,954 FLSA cases were filed. While many audits are initiated by employee complaints, the U.S. Department of Labor’s Wage and Hour Division (WHD) can choose to conduct an investigation into a company’s timekeeping and payroll practices at any time. According to the WHD’s website, “in the fiscal year 2015, more than 42 percent of investigations were agency-initiated, up 35 percent from just six years ago.”

Large-Scale Pushback

As the compliance deadline for the new overtime rule draws near, states are growing apprehensive of the rule’s sweeping impact. In fact, in September, 2016, 21 states came together to file a lawsuit against the Department of Labor.

According to an article in The National Law Review, the crux of the states’ argument is that the new rule will cause state and local governments to incur increased labor costs that would decimate their budgets.

Despite the states’ push back, employers are encouraged to continue preparing for the Dec. 1 deadline.

Don’t DIY

It is crucial that businesses take a second look at their overtime expansion plan to avoid the costly consequences noncompliance could bring. A few guiding questions to get your business started might be:

  • Are all your job descriptions and company policies up-to-date?
  • Can you provide proof of exemption for every employee classified as exempt?
  • Could you accurately report three years’ worth of employee wages with confidence that everyone was paid correctly?
  • Are your managers trained to recognize and avoid noncompliance issues regarding overtime?

Companies need a trusted ally to help them remain compliant. With Paycom’s Labor Allocation tool, businesses can find the most cost-effective plan for their unique situations. This, combined with powerful human capital technology such as documents and checklists, time and labor management and training tools, can help you lessen the impact overtime expansion has on your business and your people.

The right tools and plan help ensure the changes your business employs are smooth instead of stressful. All it takes is a second look.

DISCLAIMER: The information provided in this blog is for general informational purposes only. Accordingly, Paycom and the writer of the above content do not warrant the completeness or accuracy of the above information. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other professional services.