How to stay compliant under new federal overtime salary rule

The new overtime final rule implemented by the U.S. Department of Labor on January 1, 2020 raised the salary threshold under the Fair Labor Standards Act (FLSA) from $23,660 per year, or $455 per week, to $35,308 per year, or $684 per week. This means that 1.3 million workers who did not previously have overtime eligibility will now be eligible for overtime pay. 

If you’re a small business owner with newly non-exempt employees, you must make sure those staff members are paid overtime if they work more than 40 hours in a workweek. While making changes is never easy, there are several ways you can navigate these new costs and, in the process, create a stronger and more efficient way of running your organization. 

Here are a few strategies to consider implementing into your business to make the transition into having more non-exempt employees a breeze. 

Utilize automated time-tracking software

In order to determine whether or not you should raise a salaried worker’s pay or decrease their hours, an efficient time-tracking solution should be implemented into your business’s operations. Homebase’s Timesheet App is a great tool that does just that. 

With the Homebase app, you can prepare your timesheets without a calculator and save hours every payroll period. Homebase automatically identifies errors, including missed breaks or clock-outs. You can even calculate overtime right in the app and identify errors automatically before exporting your records directly to popular payroll providers without any data entry.

Using an app like Homebase will both improve your business’s efficiency and reduce any errors that may take you out of compliance. Plus, the FSLA requires all employers to maintain time cards and other employee records to ensure all employees are receiving the pay they have earned, and Homebase stores all of those records for you. 

Review workload and rates 

Take a look at how many duties any employee impacted by the new rule has on a day-to-day basis and ask yourself: do these duties need to be redistributed to other employees to make sure no one is working more than 40 hours in a week? 

You can also evaluate your current vacation and sick time policies at this time and consider modifying how your employees accrue the time off. 

Next, look at your current hourly rates. Are they correct? There are two easy steps you can take to ensure you’re paying your employees the right amount: 

  1. Look at the number of hours a given employee works in a regular workweek, both regular and overtime. If an employee works 60 hours a week, there would be 20 hours of overtime. 
  2. Divide the employee’s average weekly salary by the number of hours they work. 

Make sure your new rate is higher than the minimum wage in your local municipality. If your calculated rate is in fact lower, than you’ll need to either adjust an employee’s hours or increase your labor budget.

If you subscribe to Homebase’s Plus plan, you’ll be able to automatically track overtime for salaried employees below the threshold. All you have to do is enable the feature in your settings and you’ll get alerts when an employee is about to hit overtime. 

Communicate changes to your impacted employees 

Whatever changes you decide to make, it’s important that you communicate effectively to your team to ensure they don’t have any negative feelings with the newly implemented strategies. 

If you are moving a salaried employee to an hourly setup, make sure they are aware that it is not a demotion. There might even be specific laws in your area stipulating when you need to inform an employee of any changes being made, so be sure to check with your local and state governments, or consult an employment lawyer. 

Remember this is not official legal advice. If you have any overtime-related concerns, it’s best to consult an employment lawyer. 

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