In May of 2016, a few important changes were made to the Fair Labor Standards Act, a set of laws designed to protect workers from exploitation. Though the new changes won’t take effect until December, this news will impact the lives of well over 4.2 million working people who spend more than 40 hours a week on the clock and are currently classified as “exempt” from overtime pay.
In the 1960’s, policy makers recognized that hourly employees needed to receive overtime pay—their hourly rate times 1.5—during the time they spent on the clock beyond a standard 40 hours per week. Highly paid and managerial employees were exempt from overtime pay requirements on the grounds that they often worked more than 40 hours per week and were already compensated for this time by generous annual salaries. But the cutoff salary rate that separates exempt and non-exempt employees has been long overdue for a change.
Prior to 2016, the threshold between exempt and non-exempt employees fell at $23,660 per year. Employees who earned this amount or less were entitled to their hourly salaries plus 1.5 percent for every overtime hour they put in at work. Employees with higher salaries were considered exempt or managerial, and they were expected to stay until the work got done. Employers could expect or demand that these workers stay onsite without receiving any additional compensation for their extended time commitments.
When the new FSLA standards are implemented, this salary threshold will increase to $47,476 per year. While this increase falls about 3,000 dollars below the proposed amount, it still represents a significant increase that will ideally protect hard working employees (regardless of the managerial nature of their responsibilities) from exploitation.
Here are a few steps employers will need to take as the implementation date approaches.
Determine if these changes will affect your organization: These rules will apply to your company if your sales and receipts exceed $500,000 each year, if you provide healthcare or medical services, if your organization is a state or federal agency, and if your organization is a school (public, private, for-profit or non-profit.)
Determine how many of your employees will need their exempt status reclassified.
Review your payroll budget and decide which newly non-exempt employees should receive salary increases to stay exempt, and which will need to receive overtime pay for their extended hours on the clock.
Shift job responsibilities among current staff members or hire temporary staff to remove work burdens from current teams and reduce expensive overtime.
Consider reducing the strain on your budget and your employee’s time by exploring the benefits of contingency staffing. Contact the Little Rock recruiting experts at CSS for more information.