FLSA Overtime: How, When and Why to Prepare

Transcription

1 FLSA Overtime: How, When and Why to Prepare Sponsored by February 16, 2016

2 Partner Organizations The following organizations have joined us in presenting this webinar.

3 Partner Organizations The following organizations have joined us in presenting this webinar.

4 Presenters Ricardo Coronado, Tarrant County College District Jennifer Donnelly, Sibson Consulting Heather Murray, Gonzaga University Linda Peltier, Edison State Community College Sharon Thomas, George Mason University John Whelan, Indiana University Carolyn Wong, Sibson Consulting

5 Brief Overview of Proposed FLSA Regulations, Initial Concerns, and Potential Impact on Higher Education Jennifer Donnelly Vice President Carolyn Wong Senior Consultant 4

6 Introduction The Fair Labor Standards Act (FLSA) is a federal law that governs whether or not employees receive overtime pay. President Obama tasked the Department of Labor (DOL) with updating the FLSA regulations in early Proposed regulations were released in July 2015 with the primary change of raising the salary threshold that generally determines who is eligible for overtime pay. 5

7 Proposed FLSA Changes Timeline* Changes proposed to FLSA Labor department review begins Potential Release of Final Regulations July 6 September 4 Fall 2015 Early 2016 Mid-Late 2016 Grace Period Comment period ends Labor department review ends TBD After the DOL publishes the annual increase to the salary threshold, organizations have 60 days to comply before the new threshold becomes effective. * Timeline indicated above is proposed and subject to change. 6

8 Comparison of Current vs. Proposed Changes CURRENT (Since 2004) PROPOSED $455/week or $23,660/year Minimum Salary Threshold $970/week or $50,440/year* For exempt status, the employee s primary duty must still be administrative, executive, professional, or related to outside sales Exempt status at $100,000/year Must partake in office or non-manual work and perform at least one administrative or professional duty Job Duties Test Highly Compensated Workers (HCW) Test No changes released as of July. However, discussion around potential change to limit amount of time exempt employees could perform non-exempt work Exempt status set at $122,148 (90 th percentile of weekly earnings) No changes proposed in duties required * Proposed threshold for 2016 set at 40 th percentile of earnings for all full-time salaried workers 7

9 Concerns About Proposed Changes Salary threshold of $50,440: Is seen as too high and has significant impact on higher education Does not account for regional differences and areas with lower cost of living Definition of salary threshold (40 th percentile) does not match historic trends 60-day implementation period is too short: May conflict with institution s budget planning process Will be challenging for institutions to plan and administer changes, and balance competing priorities strategically Unique positions in higher education make it challenging to meet the demands of any changes to the FLSA regulations Effect on part-time exempt employment is unclear 8

10 Poll Question What portion of your exempt population do you expect will be impacted by the proposed salary threshold? Less than 10% About 25% About 50% More than 50% 9

11 Potential Impact of Proposed Changes Significant Financial Costs Large financial impact due to salary increases for exempt employees, new overtime payments, hiring of additional staff, costs associated with layoffs, and benefit reclassifications Organizational and Cultural Challenges Changes may affect salary equity, ability to recruit and retain top talent, career paths and development opportunities, succession planning, and employee engagement and morale Modification of Processes/ Structures/Systems Modifications of internal processes/structures/systems may be needed to accommodate the significant number of employees moving from exempt to non-exempt status. These may include the job description process, organizational structure, workload distribution, timekeeping procedures, and compensation and benefits policies Need for Change Management, Communication and Training Significant change will require timely, tailored communication from Senior Management and HR to ease employee anxiety and stress. Comprehensive training and education for managers and leaders across the institution will be critical to ensure compliance. A focus on change management will be important for successful implementation 10

12 Specific Functional Area Considerations Academic Positions Positions that spend a portion of time teaching/ instructing students may be subject to classification changes under the proposed regulations (adjunct faculty, teaching assistants, etc.) Institutions may need to consider changes to their academic strategy, overall faculty structure, and faculty workload/course load as a result of the regulations Admissions, Athletics, Development Positions that require significant travel, irregular hours, or fluctuating seasonal demands will be affected by proposed changes (admissions counselors, athletic coaches, development officers, etc.) Institutions will need to accurately track and capture all work hours for these positions, while balancing and controlling for overtime costs Research Research professional salaries, particularly those funded by grants, are typically below the proposed minimum threshold level Institutions may see a decrease in research positions and/or grant funding as limited funds are used to increase employee salaries above threshold level Research professionals have flexibility and autonomy in conducting their research. Reclassification and/or compensation restrictions will likely change how they conduct their work and lead to a loss of flexibility, productivity, innovation, teaching, and discovery 11

13 Considerations and Preparation for Upcoming Changes What can you do now? Identify employees that earn salaries in the $23,660 to $50,440 range and conduct an analysis of: Costs to bring employees to minimum salary threshold Overtime hours actually being worked Wage compression issues Benefit cost changes Review organizational structure and work with functional leaders to discuss how to modify and manage structure, jobs, staffing levels, and career advancement/growth opportunities given changes Examine current compensation structure to determine effect of reclassification of employees Review relevant policies (e.g. compensation and benefits, timekeeping, classification process, etc.) and make revisions where needed Begin to develop training strategies to ensure compliance Assess time and attendance processes, work flows and systems and develop plans to revise processes to support effective roll-out and administration of changes Assess and monitor climate and engagement of employee population 12

14 Poll Question Which of the potential areas of impact is the greatest concern for your institution? Financial Cost Cultural Challenges Processes/Systems Change Management 13

15 Preparing To Do the Work Sharon Thomas Workforce Planning Manager 14

16 George Mason s Cost Estimates George Mason University is a public university in Fairfax VA; top Carnegie research ranking; 34,000 students; 4,000 full time faculty & staff Estimated Annual Costs (excluding fringe) No salary increase, change to Increase salary to nonexempt & overtime estimates Exempt Employee Type $50,440 to remain exempt 1 hour overtime per week 5 hours overtime per week Post Docs $ 90,036 $ 32,230 $ 161,151 Research Faculty $ 419,016 $ 106,255 $ 531,277 Administrative Faculty $ 135,306 $ 57,290 $ 286,452 Professional Faculty $ 1,038,887 $ 143,849 $ 719,245 Staff ($45,855 & above) $ 422,067 $ 241,323 $ 1,206,618 Staff ($45,854 & below) N/A $ 111,265 $ 556,322 Total $ 2,105,312 $ 692,212 $ 3,461,065 15

17 George Mason s Concerns Post Docs & Research Faculty Postdoctoral fellowships Nature of research work Grant funding Coaches Scheduling differences when sport is in/out of season Self-generated funding Support Staff State limitations Compression Uncertain overtime 16

18 Strategy Heather Murray Associate Director of Human Resources 17

19 FLSA = UFO Gonzaga University is a private, Jesuit institution, non-research and nonunion with slightly over 1,400 faculty and staff GU-HR s approach UFO = Un-Funded Obligation Scope of evaluation: Efficiencies where can we best utilize technology services and recognize changing nature of work Consider additional headcount or something must give Consider salary increase to threshold to remain exempt classification with a formal position re-evaluation and only if cost is manageable Change position s classification to non-exempt and incur the potential OT 18

20 Impact Analysis Do not lose sight of intent of the law Long-term impact inflating market data Find balance between work expectations and quality of life OT is a controllable expense Set policy on what constitutes reasonable OT 19

21 Strategies Leadership position = no adjusting description or competencies without a formal evaluation to FLSA criteria and benchmark against survey data Committed to appropriate OT funding HR partnering with Finance to create a centralized contingency Formula = 2x of last year s OT spend Intent is to manage the $$$ and maintain culture alignment based on University s mission Policy revision actively discussing potential policy implications Vacation accrual rates Travel policy 20

22 Strategies continued Educate, Educate, Educate Create a holistic education effort Develop training for supervisors and individual contributors across all areas on campus Hold open meetings Present at departmental meetings Establish tone of shared responsibility 21

23 Poll Question Does your college or university have different benefits or perks for exempt and non-exempt employees? Yes No 22

24 Morale John Whelan Associate Vice President and Chief HR Officer 23

25 Morale Indiana University is a public research university with 114,000 students and 23,000 faculty and staff members on eight campuses Identify changes to impacted employees Pay, work schedule, benefits, perceived status, career concerns, certifications, etc. Assess emotional reactions or impact to morale What are the most sensitive issues? Communicate Lead rather than react Explain facts and rationale, but empathize Caution audience is more than just impacted employees Role for more than just compensation person(s) Avoid unnecessary complications If possible, decisions should not be strictly financial 24

26 Poll Question In which area of your institution do you anticipate the biggest impact to occur? Student Affairs/Services Administrative Athletics Admissions Other 25

27 Community College Challenges Linda Peltier Executive Director of Human Resources 26

28 Addressing the challenges of the new OT regulations Edison State Community College is a two-year public institution with 143 faculty and staff serving 2,700 students Are your job descriptions up-to-date to include current exempt or non-exempt status? In 2009 Edison implemented a new grade/salary structure which has enabled us to keep our job descriptions up-to-date Which positions are going to be impacted? At Edison, the areas impacted the most are the coordinators/directors of: Financial Aid Student Affairs/ Admissions Athletics/Student Life Library Marketing Human Resources IT What about the budget and preparing for our July 1 st fiscal year? The lowest annual salary of employees impacted in this group is $34,657 The new regulations will impact 26 of our 47 professional/technical employees, elevating our non-exempt number from 31 to 57 No, our budget cannot accommodate increasing their annual salaries to meet the new threshold! 27

29 How To Prepare Establishing a plan In assessing the positions, some will only be impacted during high enrollment times and at the start of each semester. We will control some of this through flex time. Other positions like our Director of Financial Aid, Director of Athletics/Student Life, and IT positions will have more of a budget impact due to the necessity of working overtime Tracking OT hours will be foreign and cumbersome for these employees Supervisors will need to estimate the projected OT hours/costs to be presented during their budget planning process Taking into consideration the total compensation package, it is not an option for our budget to add positions. It is more feasible to pay the overtime. The challenge will be to assure that it is applied consistently across campus Strengthen our policies and procedures to make sure that employees know the specific guidelines for working overtime. One of the primary focuses will be on reading and responding to s after hours and on weekends Change is not easy, therefore, communication and training is going to be essential with accountability being an important piece 28

30 Community College Challenges continued Ricardo Coronado Associate Vice Chancellor for Human Resources 29

31 FLSA Salary Exemption Pay Level Tarrant County College is a comprehensive two year institution with over 50,000 students across six major campuses Current Salary Range Level for Exempt Employees Lowest Class Code (Pay Grade 15) for Professional Staff including part-time Lowest Class Code for 12- month Continuing Education Instructors Exempt Pay Starts at $46,792 New Proposed Min. Salary for Exempt Employees New Min. Exempt Pay will increase to $50,440 30

32 FLSA & Pay Implications Budget implications for salary and fringe benefits. Estimated Cost: $305,552, not including new hires coming in (Class Code FT and 45 PT) May cause salary compression and pay equity issues with the class code (pay grade and salary ranges) above it. Estimated Cost: $126, FT and 10 PT This will impact a small number of our full-time 12-month Continuing Education Instructors. Their pay is significantly lower than the new threshold of $50,440. Estimated Cost $176, FT and no part-time impacted Tarrant County College is fortunate to have positioned itself to have a higher annual salary for all of its salaried, exempt employees than most of the other community colleges. We are in a highly competitive market, able to pay, and have maintained a good market position. Total Estimated Cost: $608,872 31

33 Compliance John Whelan Associate Vice President and Chief HR Officer 32

34 Compliance Issues We already do this, what s the big deal? FLSA classification normally determined before employees are hired into role Supervisors and employees understand expectations and work parameters (mostly ) Switching existing employees from exempt to non-exempt may mean big changes Work schedule, 9-5, cell phone, s, tracking hours, etc. Need to do more with less Technology makes this a greater challenge May be perceived Lose Lose by supervisor and employee Temptation to ignore 33

35 Compliance HR Role Educate supervisors and employees Start with basics how OT works, tracking time, comp time, etc. Employee can t opt out of OT pay (we know this, but now it may be tested more than ever) Impact to the institution if not compliant HR has opportunity to be strategic partner Workforce planning Coaching OD Plan to do audit and course correct if necessary (before DOL decides to!) 34

36 Poll Question How likely are you to take action to prepare for the proposed FLSA regulation changes in the next 4 6 weeks? Unlikely Somewhat Likely Likely Very Likely Definitely 35

37 Questions/Answers 36

38 FLSA Overtime: How, When and Why to Prepare Thank you! Sponsored by February 16, 2016