Why new overtime rules will raise payroll costs for employers of all sizes
- While the DOL's rumored May 12 release for the new FLSA regs didn't materialize, preparations should take place now, as the rules are likely to shake up employers of all sizes.
- According to Employee Benefits News, and the DOL projections, 4.6 million employees currently exempt will become non-exempt because of the higher annual salary threshold.
- While some employers have been trying to get ahead of the curve by doing wage and hour assessments – for example, the employment law firm Littler Mendelson recently surveyed 85 clients and found 86% had begun to prepare for the changes in some fashion – the efforts alone to adapt and adjust to the rule will cost employers, according to EBN.
Employers have limited options, according to EBN. They can raise employees salaries over the threshold and keep them as exempt (no overtime). They can move employees from salaried to hourly and invoke a ban on overtime without prior authorization. Or, finally, they can turn salaried employees to hourly workers and pay overtime at 1.5 times their normal hourly rate should they work more than 40 hours per week.
However, EBN notes that while there may be some creative alternatives to those three basic options in controlling costs, the options also bring some risk with them. No matter what, the new rules are likely to result in "significant administrative" burdens on employers. The article cites one expert who explained that many employers never tracked hours because their workforce is 100% exempt. So if they must go hourly with some workers due to the much higher threshold, it will require new labor management systems, primarily for timekeeping.
One attorney in the article says until the new regs are made public, it's very difficult for employers to make any "concrete changes," because workforces vary so much.