{"id":439,"date":"2016-07-15T01:31:29","date_gmt":"2016-07-15T09:31:29","guid":{"rendered":"http:\/\/blog.amgtime.com\/?p=439"},"modified":"2020-06-05T06:45:46","modified_gmt":"2020-06-05T13:45:46","slug":"overtime-law-change","status":"publish","type":"post","link":"https:\/\/amgtime.com\/blog\/overtime-law-change\/","title":{"rendered":"FLSA Overtime Law Change Will Increase Labor Costs"},"content":{"rendered":"

<\/span>1. Overview<\/strong><\/span><\/span><\/h2>\n

On May 18, 2016, the Department of Labor amended the Fair Labor Standards Act<\/strong> regarding worker\u2019s overtime pay. Starting December 1, 2016 the threshold to be considered exempt from overtime pay will increase from $23,600 ($455 per week) to $47,476 ($913 per week). The threshold change will affect about 4 million workers<\/strong> across the country as their status converts from exempt to non-exempt. In addition, the threshold will continue to update to the 40th percentile of salaried workers every three years after the initial change. It is important for employers to understand the steps<\/strong> to take and solutions available in order to strategically prepare for the change coming in December of this year.<\/p>\n

<\/span>2. Steps to Prepare<\/span><\/strong><\/span><\/h2>\n

There are a few simple steps that employers can take in order to make the change quick, easy and stress free.<\/p>\n

    \n
  1. Pinpoint salaried employees making less than the new threshold of $47,476<\/strong><\/li>\n
  2. Calculate the average number of hours each of these workers work in a week<\/strong><\/li>\n
  3. Note the employees working more than an average of 40 hours a week; these will be the employees affected<\/strong><\/li>\n
  4. Using each affected employee\u2019s salary and average hours worked, calculate their hourly rate<\/strong><\/li>\n<\/ol>\n

     <\/p>\n\n\n\n\n
    Formula for Hourly Rates<\/td>\n(Salary \/ 52 weeks) \/ Hours Worked per Week<\/td>\n<\/tr>\n
    Example<\/td>\nEmployee A works on average 47 hours a week and earns a salary of $35,000. Employee A\u2019s hourly rate is ($35,000\/52)\/47 = $14.32<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

     <\/p>\n

      \n
    1. Based upon hourly rate received above, calculate the new compensation for Employee A<\/strong><\/li>\n<\/ol>\n

       <\/p>\n\n\n\n\n
      Formula for Annual Income under New Regulation<\/td>\n((Hourly Rate x 40 Hours) + (Overtime Rate x Overtime Hours per Week)) x 52 weeks<\/td>\n<\/tr>\n
      Example<\/td>\nNew compensation for Employee A is (($14.32 x 40) + ($21.48 x 7)) x 52 = $37604.32<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

       <\/p>\n

      Starting December 1st<\/sup>, 2016, Employee A will be a nonexempt employee and will be making $37,604.32. This is $2,604.32 more than the employee is currently making. There are solutions an employer can take to avoid this increase<\/strong>. It is important to analyze each option strategically, as well as find the most accurate time tracking assistance in order to reduce labor costs.<\/p>\n

      <\/span>3. Solutions<\/span><\/strong><\/span><\/h2>\n\n\n\n\n\n
       <\/p>\n

      Solution 1<\/u><\/p>\n

      \n<\/td>\n

      		Increase salaries above the threshold of $47,476.<\/td>\nGreat solution if all your impacted employees are close to the threshold, and might earn more than $47,476 with overtime.<\/td>\n<\/tr>\n
      \n

      Solution 2<\/u><\/p>\n

      \n<\/td>\n

      		\n

      Convert employees with salaries under the new threshold to hourly wages and do not allow them to work overtime.<\/p>\n<\/td>\n

      		\n

      If as an employer, you can monitor and control overtime, this is a good option.<\/p>\n<\/td>\n<\/tr>\n

      Solution 3<\/u><\/td>\nDo not change employees\u2019 salaries under the new threshold and pay the overtime rate.<\/td>\n\n

      If employers are comfortable with the additional labor costs, employees will receive the added compensation.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

      <\/span>4. How AMGtime Can Help<\/strong><\/span><\/span><\/h2>\n

      Track and monitor hours of salaried employees. Run reports and find patterns on how salaried employees work. Control overtime with an easy dashboard<\/strong><\/p>\n