Minimizing Financial Impact of Imminent New DOL Overtime Threshold
In the first blog, (http://rmk.0d8.myftpupload.com/will-the-revised-overtime-law-affect-you/) we outlined several action steps the Employer may want to consider executing now. The first step was to identify employees likely to be affected because they are currently classified as exempt and under the new compensation threshold will no longer qualify to be classified as exempt from the FLSA.
Since those employees previously worked over 40 hours per week without payment for hours over 40, what can be done to control those hours and or the financial impact of overtime pay? Every company may have an array of differing situations and classifications. We offer a variety of suggestions to consider or at least investigate.
- Payment of overtime is for hours over 40 in a “standard work week”. Sometimes overtime occurs because of end of week emergencies or weekend emergencies. One response is to change the “standard work week” for an individual, department or group of employees. Instead of the work week being Sunday through Saturday or Monday through Sunday; would it help to make the standard work week Wednesday through Tuesday? Then unscheduled weekend work could be countered by scheduling fewer hours on Monday or Tuesday. This is one way of taking some control over the unexpected.
- There is also what the FLSA refers to as the Fluctuating Workweek Plan. (See http://canons.sog.unc.edu/?p=7961. This is a pay plan where the employer communicates to the employee, you will be paid a specific salary for each week. (This is fixed- not changed weekly). The amount the employee is paid for hours over 40 in the specified work week is a function of the hours worked. For example: if employee is paid $800 per week and works 45 hours; the overtime rate is $800 divided by 45 hour resulting in an hourly rate of $17.78. Conversely if the employee had worked 60 hours, the hourly rate would be $800 divided by 60 hours resulting in an hourly rate of $13.33 per hour. The premium pay for the first example would be $17.78 divided by 2 resulting in additional pay of $8.89 for each of the 5 hours over 40.
- Employers are permitted to structure new pay plans so as to minimize the financial impact of an employee’s becoming subject to the FLSA’s overtime requirement. The above are just a couple of the possible ideas for taking control of expenses potentially flowing from the new overtime threshold. The purpose here is to demonstrate there are a variety of solutions to this imminent issue. Each company will have to consider its own particular circumstances and opportunities.
For Employees to consider:
How would you feel about either of the above ideas? If you had a choice, which solution would be your choice? With the change of standard work week, the result may be that you worked several hours on Saturday but will no longer be scheduled to work a full day on Monday or maybe have Monday off.
With the fluctuating work week you have the security of knowing you will receive at least 40 hours of pay every week.
There are employee advantages to both of the above ideas submitted. You may actually like some of the choices that become available