Overtime Rule Compliance: What You Need to Know

You are probably well aware of the U.S. Department of Labor Fair Labor Standards Act rule change that will make 4-5 million employees across the country that are currently salaried/exempt eligible to be paid overtime. We’ve been keeping close tabs on it since many of our customers will be affected, and, as the recently finalized rule change states, companies have until Dec. 1, 2016, to comply.

Department of Labor officials say the rule will extend protections to 4.2 million workers across the country. Detractors say that the rule places an undue burden on many businesses, and will actually have a negative effect on many workers’ wages. When the rule takes effect in December, employers will have to:

• Determine who is currently salaried between $23,660 and $47,476 and would be potentially eligible for overtime pay.
• Calculate the financial impact to the company—which can be a long and laborious process with disparate, disconnected systems.
• Determine whether to start paying newly eligible employees time-and-a-half for overtime work, increase their salary to the threshold, or limit workers’ hours to 40 per week.
• Implement the necessary changes in HR, payroll, and time tracking systems to accommodate the overtime rule changes and educate employees who have never had to track their hours how to do so.

The good news is that we previously surveyed Workday customers on our Community site (login required), and we were glad to see that most of our respondents (77%) either already had, or were working on having, a good grasp of the proposed rule.

But, it appears that there is still a lot of work ahead, and only a short time to do it—assuming a Congressional bill introduced in March does not succeed in blocking the rule. Nearly 52% of respondents in the Workday Community poll acknowledged that their organization had yet to identify exactly which employees will be eligible and assess the potential financial impact to the company. And, 25% of organizations told us they would not start their analysis and decide how to proceed until the final rule is released.

The overtime rule modification highlights many of the challenges of dealing with ever-changing compliance regulations. Only a unified HR system delivered in the cloud can make sure that time tracking, payroll, and benefits all reflect the same numbers of actual hours worked, and then account for, assess, and plan for the financial impact that these changes will have on your organization. In addition, unified cloud technology is designed for change—unique in its ability to adapt with evolving compliance requirements, such as the eligibility rules for both exempt and non-exempt workers.

A true cloud system allows you to configure payroll processes, pay slips, and premium rates quickly and easily. And, as changes are made, they’re captured, controlled, and secured to ensure data privacy and protection. Your technology should also let you configure business processes to record overtime for exempt employees at certain salary levels and job profiles. At Workday,  our automatic updates give customers what they need to easily navigate compliance changes so they can focus on their businesses.

Sign up for a quick, two-minute overview of Workday Time Tracking.