Changes to Overtime Pay Exemption

Effective December 1, 2016 exemptions from Federal minimum wages rules may increase the number of your employees eligible for over time pay rates.

What changes on December first is the limit on when exempt position are eligible for overtime pay. The annual wages limit will double from $23,660 to $47,476. 

Any employee positions classified as exempt should be reviewed and reclassified to non-exempt and thus will be eligible of overtime pay.  Job positions already eligible for overtime pay, these changes do not affect those positions in any way.

Reclassification of positions can result in other HR issues and further decisions and important to avoid wage problems but also changes in job duties to better control costs of overtime pay.  Choices for job positions impacted include;

• Maintain workers’ pay rate and pay additional overtime.
• Maintain their pay rate but limit their hours.
• Reduce their pay rate to maintain cost neutrality for overtime worked.

For employees being reclassified, there are options with respect to their duties, retaining   professional duties even though they are now paid overtime. Changes to any employee's position and pay can start a series of adjustments for all employees, not to forget emotional fall out form those who feel they were not given fair consideration. 

As business owners and managers review your employee positions. Identify any presently exempt positions that will be impacted and plan for appropriate changes.  It is highly recommended that you planning include talking to an HR advisor as well as your payroll accountant. 

Use your advisors to update overtime controls and policies, set clear overtime work expectations, clarify compliance with eligibility rules, and how to present changes to employees.

Additional Readings

·        Managing Overtime: Setting the stage for success by Kathy Peters -- Overtime is more than an issue of compensation. Effective employee relations strategies can alleviate common confusion and dilemmas surrounding overtime.

As a supervisor of non-exempt employees, you’re responsible for seeing that employees accurately record the time they work and receive overtime when it’s due. This article looks at managing overtime issues through workplace atmosphere, communication, and expectation setting.

·       4 Overtime Traps  by Chris Kelleher  to Avoid  Overtime. It's been a law for almost 70 years. If you thought that after all that time every business would know how to follow it, you would be very, very wrong.

Alleging violations of the overtime law is a new "growth industry," with employees (and their lawyers) going after everyone from mom-and-pop businesses to industry giants. To keep your business from becoming yet another lawsuit statistic, here are four common overtime traps and how to avoid them
• Overtime Management Techniques   by Lisa McQuerrey, Demand Media.  Overtime, or time worked beyond a standard 40-hour workweek by hourly, non-exempt employees, can wreak havoc on the operating budget of a small business. While there may be times when overtime is necessary and cost-effective, overtime pay can begin to drain your bottom line if not managed correctly. Advance planning and scheduling can help reduce the need for employees to work in excess of their scheduled hours.