Ready or not, change is coming.
On March 7, 2019, the Department of Labor put forward a new rule that would extend the eligibility for overtime pay to more than 1 million Americans. Unlike the previously blocked proposals which involved a higher threshold increase for overtime pay, the new rule is making significant headway as it makes its way to the White House for review. Several influential groups such as the Society for Human Resources Managers supported the new overtime threshold rule.
So, what are the basic things you should know?
Under the “final rule”, salaried employees who are earning $35,308 or below annually are now eligible to receive overtime compensation, a 49% increase from the previous $23,660 exempt limit. For highly compensated employees, the exempt limit was increased by more than 47% from $100,000 to $147,414.
In May 2019, the DOL stopped receiving public comments on the proposed new rule and if everything goes as planned, you should start complying with the new overtime on January 1, 2020.
Overtime: Getting Trickier to Track
The impending overtime eligibility change doesn’t only mean higher costs in wages for businesses that are affected. It can also mean trickier tracking for several departments in your company such as human resources, payroll, and legal.
This is why it’s alarming that close to 50% of businesses are not aware of the new overtime rule. Keep in mind that aside from the federal overtime eligibility rule, you have to be cognizant of the fact that there are specific state laws concerning overtime.
Let’s take the example of California and New York:
- In California, salaried employees who are earning up to twice the state’s minimum wage are eligible to receive overtime pay.
- In New York, overtime eligibility depends on location and employer size. The threshold in New York City for large employers and fast-food restaurants is $58,500 and $52,650 for companies with 10 or fewer employees. The overtime threshold is $46,800 in Westchester counties, Nassau, and Suffolk. The limit is $43,264 for other areas in New York. All dollar figures are annualized.
Of course, all these should be tracked following the recordkeeping requirements set by the Fair Labor Standards Act which includes:
- Time and day of the week when the employee's workweek begins.
- Hours worked each day.
- Total hours worked each workweek.
- The basis on which the employee's wages are paid.
- Regular hourly pay rate.
- Total daily or weekly straight-time earnings.
- Total overtime earnings for the workweek.
- All additions to or deductions from the employee's wages.
- Total wages paid each pay period.
- Date of payment and the pay period covered by the payment.
Of course, there are other things that you need to consider such as collective bargaining agreements and other related laws such as the FMLA – Family and Medical Leave Act.
Is your head spinning already?
Don’t worry, you’re not alone.
When it comes to tracking overtime effectively and efficiently, we need to talk about the T Word.Technology.
Technology’s Dual Role in Overtime Tracking
From where we stand, technology plays a two-pronged role to help you monitor the overtime hours of your employees effectively:
Let’s take a look at each.
Using Technology for Overtime Tracking and Compliance
The first step to effectively track your employees’ overtime is to accurately track the number of hours they spend at work.
While all successful employee-employer relationships are built on trust, denying the possibility that the employees who will be eligible for overtime pay when the new rule takes effect will pad their hours to earn more is — quite frankly — naive.
In fact, even without the new rule, 47% of employees have admitted to exaggerating their work hours.
For human resources, manual time tracking has been a boon for decades. Despite the administrative burden caused by manual time tracking methods, it is quite surprising that close to 40% of businesses still use outdated and manual time tracking methods such as mounted wall clocks, paper forms, and paper punch cards.
This creates a big compliance loophole, not just in terms of following the upcoming overtime rule, but other regulatory requirements such as the FMLA.
So, how does technology help in effective time tracking and compliance?
- Automated time tracking apps that run in the background accurately track employee work hours while built-in safeguards prevent exaggeration of work hours.
- Time tracking apps allow HR departments to accurately track employee work hours to make sure they don’t incur back wages and compensate employees who are truly eligible for overtime pay.
- Regulatory changes can be easily entered into comprehensive and integrated human resource management systems which would automatically make system-wide changes across multiple platforms such as payroll, PTO accrual, and overtime eligibility.
If you’ve been delaying adopting automated time tracking apps and HRM technologies in your company, the upcoming new overtime rule is another reason for you to act on it sooner rather than later.
Now, on to the second point.
Technology Increases Productivity and Reduces Overtime
Working overtime is a global pandemic, especially among highly industrialized countries.
In the United States alone, 33% of Americans work 45 hours or more weekly, while 9.7 million work more than 60 hours a week or 12 hours per day.
While occasional overtime is necessary during specific times (i.e. product launches), regular overtime among employees is a sign of poor productivity — a perennial topic in the modern workplace.
Minimizing overtime in your business is not just about saving on overtime expenses, but also ensuring that your workforce is productive, engaged, happy, and healthy.
Here are 5 ways technology can increase productivity in your business and minimize overtime:
- Productivity, time tracking, and project management tools help you identify bottlenecks in your systems and processes.
- A time clock software alerts managers and HR employees who are about to reach their maximum weekly or monthly work hours limit. This enables managers to reach out to these employees for possible roadblocks and other reasons for project delays.
- Employees become self-policing with how they spend their time in the workplace and minimize the amount of time they spend on administrative and unproductive tasks.
- Automation tools streamline manual processes.
- Technology empowers remote working which has been proven to increase productivity and employee workplace satisfaction and happiness.
With the need to keep overtime costs down because of the impending new rule on overtime eligibility, technology-driven workplace productivity is something you should seriously consider.
Adopting to Overtime Rule Changes Will Never Be Over
Since the establishment of the employees’ right to receive overtime pay in 1938, businesses have adopted several rule changes. The reality is, it’s never going to end. Overtime pay and all other matters related to employee compensation are influenced by ever-changing external factors.
With the help of technology, complying with these new labor laws and regulations is easier and empowers businesses to be more flexible and agile to changes.
Dean Mathews is the founder and CEO of OnTheClock, an online employee time tracking app that helps over 8,000 companies all around the world track time. Dean has over 20 years of experience designing and developing business apps.