Organizations across the country are responding to the U.S. Department of Labor’s new overtime salary threshold by reclassifying some of their exempt employees into overtime-eligible nonexempts.
Starting Dec. 1, the new DOL rules take effect that nearly double the salary threshold at which most salaried workers become exempt from having to be paid overtime. The overtime ceiling will rise from $23,660 per year to $47,476. That means more than 4 million additional workers will qualify for overtime pay for the first time. So now is a great time to review your policies on when and how to pay hourly workers. Here are seven FLSA mistakes to avoid:
Mistake #1: Not paying for all work time. When they were exempt, these employees probably worked lots of hours to get the job done. And you appreciated that. But now managers need to track and control employees’ excess work hours. This may entail redistributing work or increasing staffing levels. It also means requiring employees to get manager approval to work overtime and recognizing that employees’ prework or postwork activities are compensable if those activities are principal activities that benefit the employer, and not the worker. (Example: the employee answering texts or emails at home, after hours.)
Mistake #2: Not paying employees who work through meal breaks. Employees don’t need to be paid for meal breaks if they are at least 30 minutes long and people are completely relieved from work. Watch out: Some time-keeping systems automatically deduct time for meal breaks, whether or not employees are relieved during the time.
Mistake #3: Not paying employees for waiting time. Employees who wait around for work must be paid. (Example: Call center employees who spend time waiting for work areas to become available after their shifts started had to be paid for that time.)
Mistake #4: Not paying employees for travel time. Employees’ commuting time isn’t compensable. This is true even if people go from home to the first job of the day and return home after the last job. But hourly employees’ travel time to different job sites during the day is compensable.
Mistake #5: Miscalculating overtime pay. Employees earn overtime at 1.5 times their regular rates of pay. As a general rule, any payment that’s measured by or based on employees’ hours worked, production or efficiency must be included in wages for purposes of determining the regular rate of pay.
Mistake #6: Not paying telecommuters for all hours worked. Employees who work from home must be paid for every hour worked. Problem: getting them to keep track of their hours. Idea: You may come to a reasonable agreement with telecommuters regarding their work hours. Agreements should account for their agreed working hours and be written, signed and dated.
Mistake #7: Averaging hours worked during different weeks in a pay period. Employees are paid based on a workweek — a continuous 168-hour period. Employees who work 60 hours during one week and 24 hours during the second week of a two-week pay period must be paid overtime for the 20 overtime hours worked during the first week. You can’t average hours over those two weeks, which would result in an overtime liability of only two hours.
Whether you are an employer or employee, please visit the U.S. Department of Labor’s website or consult with your local Dallas CPA Firm if you have any questions about reclassifying employees or your own classification!
