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How Companies Are Preparing for New Overtime Regulations

Time Clock and Time Card

On June 30, the United States Department of Labor (DOL) announced proposed rules amending the regulations governing certain overtime exemptions of the Fair Labor Standards Act (FLSA) that will broaden the number and range of employees who qualify for overtime pay. While these regulations may still be months away before being finalized, most companies will need to develop a strategy for implementing changes to their payroll processes.

One of the proposed new provisions, which would increase the standard salary level to qualify for exemption from the FLSA minimum wage and overtime requirements as an executive, administrative or professional employee from $23,660 annually to $50,440 annually, hasn’t been updated since 1975 when more employees on average qualified for overtime pay. This proposed change is causing many companies to rethink their hiring processes, as well as how they will monitor employee hours and pay certain workers.

According to a recent article from The Dallas Morning News, companies like Southern and Midwest restaurant chain 22 Back Yard Burger are considering moving some managers to hourly pay and hourly shifts to keep costs down in preparation for when the new law takes effect. Other companies like Mooyah Burgers, Fries and Shakes is debating whether its owners should change their employees’ wages to hourly rates or raise their salaries in order to address the new overtime criteria, according to the same article.

No matter what approach is taken most businesses will need to allocate more resources to closer track employee hours to comply with the proposed new overtime regulations. Some companies will turn to electronic tracking processes and adopt new software that alerts employers when workers are approaching their time limit for the day. The software may also be used to help employers measure their employees’ deliverables and effectiveness. A recent article by The New York Times looked at the pros and cons of various time management tracking systems that companies are currently using to manage their workforces.

While many payroll directors are in the throes of preparation before this new provision takes effect, one thing is certain: the way businesses manage their employees’ hours and wages will need to continue to evolve. Click here to learn more about electronic payment solutions that may help streamline your company’s payroll processes.

The information provided in this blog post is for informational purposes only and not for the purpose of providing accounting, legal, or tax advice. The information and services ADP provides should not be deemed a substitute for the advice of any such professional. Such information is by nature subject to revision and may not be the most current information available.

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