According to the U.S. Bureau of Labor Statistics, employees work an average of 42.5 hours each week. This means that, on average, a qualified employee is receiving roughly two hours’ worth of “time and a half” pay. Currently, an employee is qualified to receive overtime pay if they make less than $455 per week (equivalent to $23,660 annually) and work over 40 hours for the week.
The criteria for qualification, however, may become broader.
On March 7, 2019, the U.S. Department of Labor proposed a major change to employee exemption criteria under the Fair Labor Standards Act (FLSA). The proposal boosts the salary threshold at which workers are eligible to receive overtime to $679 per week (or $35,308 per year). This will extend overtime protections to more than a million more American workers eligible for overtime.
In case the change does go into effect in 2020, employers need to start thinking now about how to mitigate labor costs.
Evaluate Your Employees
There’s no better time than now to review your employees’ pay to see how many of them would be eligible. Depending on the results, your organization might actually save money by providing salary increases to certain employees that are close to meeting the salary minimum (but don’t currently).
Another factor to consider is figuring out whether or not employees are non-exempt by evaluating the number of hours they are working. With an automated workforce management solution that automatically tracks important labor information like hours, pay rates, qualifications, and job types, you should be able to extrapolate this data easily.
Evaluate Your Scheduling Practices
How confident are you that the overtime currently being issued is necessary? And if it is, are you certain that the employees putting in OT hours for that particular job are the most qualified and fiscally responsible choice? You could be consistently assigning OT based only on seniority, meaning that someone making more money is getting paid for more overtime hours than someone who has a lower pay grade and is just as qualified.
Not having complete certainty of employees’ past schedules can quickly increase an organization’s spending, particularly when managers and schedulers cannot accurately anticipate their overtime costs. Mentally tracking overtime or manually typing hours worked into an excel spreadsheet increases the risk of the scheduler not knowing which employee is close to exceeding their 40 hours.
With automated scheduling, you can input company restrictions based on your specific business needs to prevent unnecessary overtime. Each shift employee will be assessed by these rules when the schedule automatically generates.
Increased overtime visibility coupled with straight-time scheduling transparency means that your weekly rosters will always sync up with production demand. Due to this, you’ll have actionable insights to help dictate future labor costs. For example, you can find that demand has grown substantially over the past year and that it would be more cost-effective to hire more full-time employees than to continue distributing extra overtime.
The Indeavor Solution
Indeavor Operate is our workforce management SaaS solution which offers clients an end-to-end, cloud-based employee scheduling, time & attendance, and absence management system. It integrates with your human capital management and enterprise resource planning systems to create a robust platform that provides you with real-time employee data.
These cost-saving measures should be something you’re thinking about whether or not the proposed changes go through. Indeavor can help. Learn more or request a demo here.