The DOL’s prediction about the new overtime reg’s impact on exempt employees: 4.2 million workers will become non-exempt on Dec. 1, 2016. That means most firms will be dealing with the challenge of transitioning exempt staffers to a non-exempt status.
Roadblocks to compliance
So now is probably a good time to review your pay practices, paying careful attention to common mistakes firms make with non-exempt employees. Here are five pay pitfalls:
- Unapproved overtime. Under the FLSA, firms generally still have to pay the employees for any hours worked even if the time wasn’t approved. But that doesn’t mean employers can’t discipline workers for logging hours that weren’t approved. In fact, employers should have a detailed process in place for overtime approval as well as specific consequences for when that policy isn’t followed.
- Meal-period payments. Employers often wind up in trouble when they have systems in place to automatically deduct an unpaid meal period (FLSA considers breaks of 30-minutes or more “bona fide” meal period that doesn’t need to be compensated). Here’s why: If an employee is interrupted 20 minutes into his or her 30-minute meal period for work, the clock starts over and the employee gets an additional 30-minute break. Automated systems can easily miss this nuance.
- Off-hours. In the era of smartphones, this is a biggie. If employees check or respond to work emails before or after their scheduled shift, chances are they need to be paid for that time. The DOL is currently investigating “… [T]he use of technology, including portable electronic devices, by employees away from the workplace and outside of scheduled work hours …”
So employers will want to make sure they have safeguards in place to prevent off-the-clock work. Here are some best practices: bit.ly/smart515
- Spreading hours. Employers are required to calculate OT hours on a workweek basis and wind up in trouble when they base these calculations on an entire pay period.
Example: Say an employee worked 45 hours one week and 35 the following week. An employer can’t skirt overtime by claiming the employee only worked 80 hours during the pay period. The workweek dictates overtime compensation.
- Travel time. Home to work or in-town (e.g., travel to local training) generally doesn’t need to be compensated. However, employees must be paid for any same-day, out-of-town travel that intersects with normal working hours. (Note: overnight, out-of-town travel has separate, more complex rules.)
Payroll: Steps to take now
Here’s what Payroll can do now to avoid problems later.
- Lay the groundwork: Take note of your pay periods in November and December, so you and others at your company can settle the details of the transition.
Look into whether you’ll need to modify your timekeeping system to prepare for a possible influx of nonexempt employees. Review any software contracts to determine the impact of creating more data files.
- Communicate with employees: Bring everyone up to speed on your procedures for recording time worked – this may be new territory for some currently exempt folks.
If your pay frequencies differ for exempt and nonexempt employees, give everyone a heads-up about any changes to how often you’ll be processing their paychecks.
- Consider other laws and regs: As part of the coming changes, nondiscretionary bonuses can be counted toward 10% of the new salary threshold. As a result, you may be asked to process more bonus checks. That means, for one thing, you should stay current with state child support laws on reporting.
Update yourself on when you must pay employees for “travel time.” In particular, know what the regs require for travel away from home.
Although some people’s status may change from exempt to nonexempt, their job duties likely won’t change. If someone’s duties will still include attending overnight conferences, that may be time worked.