Department of Labor Proposed Overtime Updates Wednesday, February 17, 2016
David Farrell, Regional Sales Director, Paycor Email: Dfarrell@paycor.com Phone: (312) 282-2300 2
Agenda 1 What is it? 2 What does this mean for your organization? 3 Q&A 3
Legal Disclaimer The information in this presentation is not intended as legal advice. You should seek specific legal advice before acting with regard to the subjects mentioned herein. Any calculations contained herein are for example purposes only. 4
What is it? What: The Department of Labor has proposed an increase to the threshold salary level needed to qualify for the white collar exemptions from $455/week ($23,600 per year) to $970/week ($50,440/year). This means if a salaried exempt employee earns under $50,440 per year they are affected by this update. 5
What is it? Employees who are affected by this law must be paid overtime for the hours they work above 40 hours per week. This means Under the proposed law, any salaried exempt employee who earns under $50,440 should be also paid overtime pay for any additional hours above 40 per week. 6
What is it? You DO NOT want to approximate your employee s hours. One Employee Unplanned OT Per Week Per Year You will need a Time solution and will likely need to track salaried exempt employee s hours. 7
Example If Bob s salary is $40,000 per year but he works 50 hours per week ($40k 52 weeks) ($28.83/hour 10 hours) New Pay $769.23 $288.30 $1057.53 Salaried Rate/Week New Overtime Pay/Week Weekly Pay Bob s new annual approximate earnings are $54,991.56 8
Example This makes understanding your salaried employee s hours very important If Bob earns And works His new estimated annual pay would be $45,000/year 44 hours/week $51,740.00 $30,000/year 48 hours/week $38,991.68 $40,000/year 50 hours/week $55,000.40 $35,000/year 60 hours/week $61,266.40 9
You need a plan! 10
What does this mean for your organization now?
What does this mean for your organization? We know this will affect a significant number of businesses. Paycor data shows that 65% of employers have one employee or more who are affected by the threshold increase. 65% Percentage of Paycor Clients Affected 12
What does this mean for your organization? You need to start taking some measures today to begin preparing. To Do Today 1. Determine if you are affected 2. Understand which employees are affected 3. Determine the hours they work and start tracking your salaried employees hours now! Example Paycor Time Clock 13
DOL Reporting and Analytics Create and run a report within Reporting and Analytics on any salaried employees earning under $50,440 If you re tracking hours, that can flow to one report as well. 14
DOL Reporting and Analytics Example Report Employee Name Annualized Salary Hours Worked Weekly Pay Rate Hourly Pay Rate for Salaried Employees OT Rate for Salaried Employees Affected Employees (Yes or No) Data You Need in One Report 15
Track and Manage Employee Hours 1 2 16
What should you be planning for?
What should you be planning for? This proposed update is expected to be put into law in early to late 2016. With that in mind, employers should start planning to also do the following. To be planning for 1. Consider the options and do the math 2. Informing your employees 3. Start tracking information in real time 18
Consider the Options We expect employers to pick between four options. 1 Do nothing and watch an employee s annual pay grow. 2 3 4 Adjust employees to an hourly rate. Then adjust the hourly rate based on hours the employee typically works. Bump up affected employee s salaries to $50,440. Mandate no overtime. Manage it profusely. 19
Consider the Options The most cost-neutral option will be option 2, adjusting affected employees from a salary to an hourly rate. 20
Adjusting to an Hourly Rate
Example Bob makes $40,000 but works 50 hours/week How do you calculate his new hourly rate of pay? 22
Example Bob s current weekly pay with his salary is $769.23. ($40,000/52 weeks /40 hours per week) In order to get Bob s new hourly rate to equal his current salary level, you have to factor in his weekly overtime hours. (10 OT hours per week.) 23
Calculating the New Hourly Rate Weekly Pay = [OT Hours*(1.5*New Hourly Rate)] + (40*New Hourly Rate) 769.23 = [10*(1.5*New Hourly Rate)] + (40* New Hourly Rate) $769.23 = 15x + 40x $769.23 = 55x $769.23 /55 = $13.99 24
Example Bob makes $40,000 but works 50 hours/week Bob s New Rate = per hour 25
Adjusting to Hourly Rate Challenging, but most cost-neutral option To do this, you must: 1. Identify affected employees 2. Have an accurate view of hours worked 3. Have a method of tracking hours in an ongoing way 26
Paycor Can Help You need a partner who can help them: Build reports required to manage the law effectively Track and manage employee hours Build updated policies and procedures for employees 27
Paycor Can Help Visit Paycor.com/DOL for additional information, including an Overtime Calculator. 28
Questions?
Exemptions There are some groups of employees who are not affected by these updates. Non-Exempt Employees Commissioned Sales Employees Outside Sales Employees Computer Professionals FLSA provides that certain skilled computer professionals who are paid at least $27.63 per hour are exempt from the overtime provisions. Drivers, driver's helpers, loaders and mechanics Exempt from the overtime pay provisions of the FLSA if employed by a motor carrier You can review a list of all exemptions here. 30
Potential Penalties If an employer is audited, they can face penalties: 1.5 times hours worked above 40. Then double it. Pay plaintiff attorney fees. Burden of proof on the employer. Can go back up to 3 years. 5 years in some states. 31
Additional resources: www.dol.gov/whd/overtime/nprm2015 For questions or more information contact: Beth Heal, Director HR & HRIS Implementation bheal@div-ins.com Matt Weimer, Director Strategic Solutions mweimer@div-ins.com www.diversifiedemployersolutions.com 32