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Preparing for the FLSA Changes

Do you remember the new Fair Labor Standards Act (FLSA) overtime rule that was passed earlier this year? The ruling was scheduled to go into effect December 1, 2016, and it would have increased the standard salary level requirement for employees. This rule’s intent was to clarify which salaried white-collar workers are entitled to overtime pay when they work more than 40 hours in a week, thereby extending overtime protections to more than 4 million workers.

However, on November 22, 2016, a federal judge has issued an injunction, which temporarily blocks changes to the regulations. Siding with 21 states and business groups, this action puts the law on hold until the court decides if the Department of Labor has the right to decide which workers are eligible.

As this matter is being sorted out, we’ve included background on the pending FLSA regulation and how Collaborative, in partnership with Workday, can help ensure your organization is compliance-ready. 

Provisions of the New Overtime Rule

The FLSA final overtime rule will set eligibility requirements for your employees including fixed salary and executive, administrative, and professional job duties. The rule will also set the standard salary level for workers at $913 per week or $47,476 annually, up from $455 per week or $23,660 annually. Nondiscretionary bonuses and incentive payments (including commissions) may satisfy up to 10% of the standard salary level, as long as they are paid quarterly or more frequently. Additionally, this rule will set the total annual compensation for highly compensated employees at $134,004 annually, up from $100,000 annually. The final provision of the rule establishes a mechanism for automatically updating salary and compensation levels every three years, making this an ongoing compliance. As an employer the question you should be asking yourself is: Does my organization comply?

Your Action Plan for the New Overtime Rule

As an employer, your first step is to identify the workers who are exempt, and review those who may be impacted by the new salary level. Current employees, new hires, and job changes within your organization represent three areas where you’ll have to consider compliance options. Starting with your current employees, you can leverage Workday to build reports that capture key data to better understand and analyze your workforce. Additionally, you can add alerts to the reports you create, which will make for more seamless and real-time knowledge around your employees. From there, you can determine whether you want to:

  1. Raise salaries of employees and keep employees exempt from overtime
  2. Raise salaries via a one-time request compensation change using Workday’s Enterprise Interface Builder (EIB) process
  3. Pay overtime and keep the same salary level for employees
  4. Reorganize workloads or adjust schedules

Of note, you can reclassify employees as non-exempt using the edit position of Workday’s EIB process or the change job business process. Based on the approach you choose, you can also create quarterly compensation audit reports in Workday.

Get Help from an Expert

Collaborative would like to partner with you to offer guidance on how you can best comply with FLSA, no matter what the future of the rule looks like. Given our longstanding partnership with Workday, we can help you minimize risks, gain efficiencies, and maximize outcomes. Additionally, our payroll and compensation consultants are well-versed in the new rule and can advise you on your options and what is best for your organization.

Click the link below to speak with a member of our team regarding more information on the new FLSA overtime rule and how we can assist you.

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