ROCHESTER, N.Y.–(BUSINESS WIRE)–The U.S. Department of Labor (DOL) is expected to finalize its proposed
overtime rule in the coming months, and despite the fact that it is
expected to have a significant impact on businesses, 1 in 5 business
owners claim they are unaware of the rule altogether. Paychex, Inc., a
leading provider of integrated human capital management solutions for
payroll, HR, retirement, and insurance services, is offering five
recommendations business owners should consider implementing now in
order to prepare for the final rule.
The rule, as
proposed, would raise the weekly salary threshold for executive,
administrative, and professional white-collar workers to qualify for
exempt status under the Fair Labor Standards Act from $455 ($23,660
annually) to more than double the amount: $970 ($50,400 annually).
The latest Paychex
Small Business Snapshot showed 20% of business owners are currently
not aware of the DOL’s proposed overtime rule and 55% said that it will
have little or no impact on their business, perhaps underscoring a lack
of knowledge on the potential implications of the rule, which are
expected to be far reaching.
Of those owners who are aware of the rule and believe they’ll be at
least somewhat impacted by its implementation, 53% said it will affect
staffing changes such as adjusting employee schedules. In addition, 19%
said they will incur increased overtime expenses, while 17% reported the
rule would lead to downsizing.
“Staying up-to-date on the ever-changing regulatory environment can be a
challenge for business owners, but unfortunately failing to comply with
such rules can lead to costly financial penalties,” says Martin
Mucci, Paychex president and CEO. “For that reason, we recommend
working with a trusted advisor to navigate new rules such as this.”
The proposed rule, which received more than 200,000 comments during an
active public comment period, will expand the number of employees who
are eligible to receive overtime pay, or time and one-half their regular
rate of pay for hours worked over 40 hours in a workweek.
In preparation for potential impacts the overtime rule may have, here
are five workflow recommendations for business owners to consider:
1. Review and identify employees
Reviewing and confirming how employees are currently classified is the
first step. Certain employees may not be impacted by the changes, but
those employees currently classified as exempt from the overtime
protections of the Fair Labor Standards Act pursuant to the executive,
professional, and administrative white-collar exemptions need to meet
the duties test for their exemption as well as the salary threshold.
Work with your payroll and HR team to review your payroll and identify
exempt employees with current salaries below or very close to the new
proposed salary thresholds.
2. Determine which employees will transition to non-exempt status
Once you have confirmed the exempt status of employees most likely
impacted by the proposed rule, you will need to decide how to proceed.
Employers have two options: (1) increase the salary level to maintain
exempt status, or (2) transition the employee to non-exempt status.
Employers who choose to transition employees to a non-exempt status will
need to determine the basis for pay (hourly or salaried) and ensure they
meet the minimum wage requirement for the number of hours the employee
is expected to work. They should also consider whether overtime will be
necessary and permitted. Consistency is crucial to mitigating exposure
to discrimination lawsuits.
3. Update timekeeping policies
Updating recordkeeping requirements and procedures can be critical to
ensure full compliance. If you have employees who will transition from
exempt to non-exempt status, you will need to begin tracking all time
worked for these employees, including overtime hours. Review your
time-tracking methods and evaluate if there’s a need for more
automation. Should the new rule significantly impact the number of
employees who need to track their hours worked, an alternative method of
tracking, such as a time and attendance software, may better suit your
It is also important to establish clear, written employee policies for
recording time worked and overtime. These should include the procedure
for recording time, what is considered time worked, how overtime is
approved and by whom, and the potential disciplinary action for failing
to follow the company’s policy. This information should be distributed
to all employees or published in an employee handbook.
4. Develop training procedures
Once recordkeeping and overtime policies have been updated, educate your
staff on the company timekeeping and overtime approval procedures. This
should be done for supervisors, managers, and newly impacted employees,
and consider a refresher for current non-exempt employees to ensure the
policy is consistently applied. Deliver this training as soon as
possible, with supervisors performing regular audits of time records.
5. Create and execute a communication plan
The new rule on overtime pay is expected to impact a significant number
of businesses this year. To combat the questions or concerns that arise,
develop a communication plan for announcing the changes internally. The
plan should introduce the procedures for reporting hours worked, as well
as when and where you will communicate the change to supervisors,
managers, and employees.
It may be best to speak first with managers and supervisors, and then to
impacted employees individually. Or, discussing the changes in job
classifications or time tracking procedures with the entire staff might
be more appropriate. Choose the approach that best fits your business,
as long as the overall message is consistent to reduce confusion and
potential compliance issues in the future.
Paychex has an advanced suite of time and attendance products, including
web and mobile tools, to assist businesses and employees with the
scheduling, tracking, and reporting of time. The solutions from Paychex
can assist companies with efforts to enforce their own policies and
comply with applicable rules and regulations.
For more information on the DOL’s new overtime rule, visit the Regulatory
Updates section of www.paychex.com.
Note: The foregoing is provided for informational purposes only, and
is not intended to be tax or legal advice. Consult your licensed
attorney, accountant, or other tax professional to discuss your
particular facts, circumstances, and how these opportunities might apply
to your business.
About the Paychex Small Business Snapshot
Data included in the Paychex
Small Business Snapshot was taken from the results of the Paychex
Small Business Survey, administered by Bredin. The survey was conducted
online between February 12, 2016 and February 26, 2016 and polled 318
principals of U.S. companies with less than 500 employees.
Paychex, Inc. (NASDAQ: PAYX) is a leading provider of integrated human
capital management solutions for payroll, HR, retirement, and insurance
services. By combining its innovative software-as-a-service technology
and mobility platform with dedicated, personal service, Paychex empowers
small- and medium-sized business owners to focus on the growth and
management of their business. Backed by more than 40 years of industry
expertise, Paychex serves approximately 590,000 payroll clients across
100 locations and pays one out of every 15 American private sector
employees. Learn more about Paychex by visiting www.paychex.com,
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