Another year, another regulation. So far, 2016 has been full of changes – the latest being the new
overtime rules. However,
this is a long-awaited remodeling, as it has not been updated since 2004. The Department of Labor recently released updates to overtime regulations that increased the salary threshold for an employee to get overtime from $455 a week to $913 a week, explained Fast Company. The Economic Policy Institute predicted that these changes will affect around 12.5 million Americans.
This rule is scheduled to go into effect on Dec. 1, but human resources departments need to start preparing for the changes sooner rather than later. While employees might be rejoicing at the possibility of more money, business owners are nervous about the changes. They may believe that the new rules won’t help their employees, but instead force them to make unpopular decisions.
How are the new overtime rules going to affect your company? Read on to find out:
A shift in job titles
Employers, Fast Company reported, can comply by raising workers’ salaries so they meet the minimum requirement of $47,476 which would disqualify them from overtime, pay overtime for workers exceeding 40 hours a week or simply ensure employees don’t work extra hours. The Society for Human Resource Management explained that employers will start by shifting role descriptions.
“They won’t actually see the extra money.”
The source spoke with Cathy Shepard, senior rewards and talent management consultant at Mercer, who explained that companies have already started scaling back. For example, jobs lower on the totem pole have been shifted from salary to hourly wages. Others will choose to undergo a staffing review to assess if overtime is within their means, or if it would make more financial sense to just hire a second employee. In either case, employees won’t be happy because they won’t actually see the extra money.
This shift in job title also means a shift in flexibility, however. The Washington Post reported that many employers are going to have to start monitoring employee’s hourly work output more closely. Alex Passantino, a partner at the Washington D.C. law firm Seyfarth Shaw, told the source that the flexible culture that employees have grown so accustomed to is in jeopardy.
“Because of the population this impacts,” Passantino said, “employers are either going to fundamentally change the nature of those jobs and take away remote access, or they’re going to have to come up with some kind of policies that address those situations. In more cases than not they’re going to lose that flexibility, [though] I don’t think it’s going to happen across the board.”
A change of pace in recruiting and promotions
The experts who shared insight with SHRM believed that recruiting efforts would take a big hit. For one, the shift in job titles and accompanying salaries is going to look less attractive to prospective hires who might be looking at larger companies that can afford to raise the minimum salary to meet the standard value that would exempt them from overtime. In fact, current employees who have already been forced to make the salary shift are reporting negative feedback, explained Robert C. Barber, attorney for AT&T. They see it as a demotion.
“The change to nonexempt adversely affects employee morale not only because of the loss of independence and flexibility in performing their work, but because of the concern that the change reflects a lack of trust in and misperception of their skills and professional trade,” Barber informed SHRM.
Failure to comply could lead to a host of legal implications
HR departments need to get a move on now in order to beat legal repercussions. Fortune spoke with another attorney at Seyfarth Shaw, Richard Alfred, who predicted that lawsuits regarding overtime were going to spike to about 9,000 – an 8 percent increase since just last year. Changing duties and job descriptions for evolving positions could create some serious gray areas, and room for legal backlash if they are not clearly defined.
It’s up to HR departments or HR outsourcing companies that work with employers to make sure they fully understand the new definitions of overtime and to thoroughly research their options before reclassifying employees.