DOL overtime rule change is coming--are you prepared? Email
Friday, April 29, 2016 08:00 AM

Is your business prepared for the upcoming proposed rule regarding overtime? Department of Labor’s Wage and Hour Division plans to update the regulation defining and delimiting the exemptions of “white collar” employees. This could have an impact on managers, foremen, sales teams, and other landscape company employees’ exempt status. 

Key provisions of the rule would:

  1. set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers ($970 per week, or $50,440 annually);
  2. increase the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually); and
  3. establish a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption.

The salary and HCE total annual compensation requirements will be automatically updated annually, though the date on which updates occur and the standard by which updates are made have yet to be determined.

Some experts estimate that the rule will be put in place by the end of the summer, while others believe it could be published in the Federal Register as early as mid-May. Once the rule is in effect, employers will have 60 days to be in compliance.

There are many ways to respond to the rule, from simply raising exempt employees to the new salary threshold to transitioning to part-time, seasonal workers for those positions. There are pros and cons for every option, and the best fit is different based on the size of the business, the current salary of exempt employees, and the duties performed by those employees.

While the parameters of the final rule are not yet confirmed, there are still important ways that employers should prepare for it.

  • Perform an audit. Tracking employee hours, duties, and workflow can help identify the employees who will be affected by the rule change.
  • Evaluate options for compliance. Is it more cost effective to pay overtime or to raise salaries to the new threshold? Should you eliminate positions in order to meet payroll budgets, increasing the responsibilities of the remaining employee? Or will you streamline the services you offer so that your current employees can fulfill their duties without incurring overtime?
  • Communicate with employees. Let staff know that the changes are coming and that you are preparing a plan for addressing them. Change can be challenging, especially in the landscape industry where recruitment and retention are already significant pain points. But by preparing for the changes, it can make the transition easier for everyone.

Most importantly, employers must be preparing now, whether the rule is put in place in two weeks or in four months. To keep your business running efficiently and with a contented workforce, you should be thinking about the most efficient way to reach compliance while growing your business.

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