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On Dec. 1, 2016, the U.S. Department of Labor changed the overtime exemption regulations. The minimum salary threshold qualification to be exempt from eligibility for OT pay goes up from $23,660 to $47,476 – or from $455 a week to $913 a week.
So if you have employees who are salaried and making somewhere between that $23k and $47k, they would now be covered under the Fair Labor Standards Act (FLSA) and could collect overtime for any hours they worked over 40 per week. (Non-salaried/hourly employees who work over 40 hours would continue to be covered by the FLSA.)
The Department of Labor estimated that up to 4.2 million workers will become newly entitled to overtime pay, including perhaps dispatchers or even salaried drivers.
If so, the Department of Labor recommended a few solutions for businesses:
- Increase the salary of an employee to the new minimum threshold so he or she remains exempt.
- Accept the changes and pay the overtime, which is one and a half times the regular rate of pay.
- Reduce or eliminate any overtime pay – this might involve hiring additional staff, which incurs its own additional costs in the form of training, any benefits like health insurance, etc.
- Reduce the amount of pay allocated to base salary (provided the employee still earns at least the applicable hourly minimum of $7.25) and add pay to account for OT for any hours over 40 in a given week, to hold total weekly pay constant.
- Some combination of the above.
The various exemptions and tests are quite lengthy; it’s highly recommended that you check out the FAQs on the Department of Labor website, and if you’re unsure about what any of this means, seek legal counsel – better to be safe than sorry and incur fines.
It's also important to consider whether you have an effective way to track and manage overtime and verify that timesheets are accurate and overtime hours aren’t being fudged.
Incorrect timesheets and overpaid overtime can put a serious strain on a business’s bottom line for any business looking to improve profits margins. Field service management software has the capabilities to eliminate timesheet fraud and high overtime costs.
Because all employees and vehicles are tracked, fleet managers and operations leaders can run reports on actual hours a vehicle is in operation, actual daily start and finish times, hours and days worked, and average daily hours and weekly totals, for example. This report is generated with a few clicks of the mouse, and because it can be used as an electronic timesheet, it removes the risk of inaccuracies, whether intentional or not.
You can help reduce overtime pay and timesheet fraud when you rely on accurate, near-real time data, and immediately catch inflated overtime hours, which means you can minimize operating costs.
This post is not intended to provide legal advice on the new FLSA rule. Please consult a licensed professional attorney to obtain advice where appropriate.