Federal Overtime Mandate: 4 Ways to Survive
For millions of Americans, the workday doesn’t end when they leave the office. According to a survey conducted by OnePoll for Good Technology, four out of five workers spend an average of seven hours a week responding to emails and meeting deadlines away from their desk. That adds up to more than 360 hours of unpaid overtime each year.
With the new federal overtime mandate set to go into effect on Dec. 1, companies will now be required to pay many of these employees for their work outside of regular office hours. For the first time since 2004, the Department of Labor will raise the overtime exemption from a salary of $455 a week to $913 per week. That update will extend overtime protections to more than 4 million workers.
This is great news for employees, who rightfully deserve to be paid for their working hours, but it could be a shocker for the businesses that are suddenly on the line for all that overtime pay. Fortunately, companies looking to keep labor costs stable and predictable have some options at their disposal. Based on what we are hearing from small businesses, here are a few strategies to help cope with the new regulations. Brands can:
For employees who work more than 40 hours a week but aren’t close to qualifying for overtime exemption, one option is to simply ensure they track their working hours accurately. This wouldn’t require any changes to their workloads, and you’ll be more confident that you’re getting your money’s worth for overtime pay.
Reduce Incentivization and Boost Salaries
Bumping salaries above $47,476 annually will keep employees exempt from overtime pay, but that extra cash has to come from somewhere. Consider reducing performance-based compensation, then use that money to give your employees a much-deserved raise.
Change Compensation Structure
Because the new federal overtime mandate only applies to salaried workers, reclassifying managers as hourly workers will guarantee businesses don’t have to pay overtime. That said, this shift would likely be perceived as a demotion, and would almost certainly lower morale in the workplace. Not a good idea.
Shift the Workload
My preferred solution. Rather than having full-time employees work overtime hours as a matter of necessity, businesses can hire contractors or part-time workers to handle any responsibilities that fall outside of a 40-hour work week.
When it comes to boosting worker satisfaction, no option is better than the last. Employees who were once saddled with 50- or 60-hour work weeks would be given the chance to spend more time with friends and family. Meanwhile, the growing freelance workforce could enjoy more opportunities than ever before. This potential influx of work is especially important when considering the fact that roughly 60 million people will be independent workers by 2020 — that’s more than 40 percent of the American workforce. Shifting overtime hours from overworked full-time employees to freelancers in need of a steady, regular stream of work could help foster a better working environment for all parties involved. Best of all, businesses would no longer be hampered by stringent overtime restrictions.
The new federal overtime mandate presents a significant challenge to cash-strapped businesses and as always, we advise seeking legal input during this important process. But by seamlessly transitioning overtime workloads from full- to part-time workers, businesses can stabilize labor costs while also improving working conditions for salaried employees.