Obama to overhaul overtime rules: What it means for Finance

Get ready! There are some big changes in store for your payroll department.

President Obama has given the Department of Labor orders to “modernize” the Fair Labor Standards Act – you guessed it! – so that more employees are overtime-eligible.

That will likely not only put a serious dent in your wallet but will leaving many companies scrambling to reclassify employees under the new rules.

While nothing’s been officially issued yet, the White House has put out a fact sheet to give us an idea of what to expect.

Here’s a rundown of what’s coming and the best ways to prepare.

3 part promise

No waiting for a long, drawn-out bi-partisan battle on this one. The President has decided it’s such a critical issue that he’s putting in an executive order to get the job done.

So just what has the DOL been tasked with? It’s a three-part plan:

• Update existing protections in keeping with the intention of the Fair Labor Standards Act (FLSA).
• Address the “changing nature” of the American workplace, and
• Simplify overtime rules to make them easier for both workers and businesses to understand and apply.

Not too many specifics have come out beyond that and the regs will be sent out for public comments.

But they are going to happen. Which means it’s a smart idea to start laying a little groundwork now so that you and your staffers aren’t left scrambling when they do kick in.

Where to start

The whole issue with the FLSA as it exists now, according to Obama, is that the rules and thresholds are antiquated – leaving many people who should be overtime-eligible out in the cold.

Of course you’ll have to wait for the changes to be released to get 100% on board with your company’s compliance, but you can still lay some groundwork now. Two areas to focus on:

1. Straight dollar thresholds. The existing weekly threshold to guarantee overtime eligibility to salaried employees is likely to be raised. Possibly significantly. So you’d be well advised to find out just how many people on your payroll hover around the existing threshold. If you have a lot that are just over it, expect those folks to start falling in the OT-eligible bucket in the near future.
2. Classifications. The president specifically called out the white-collar exemption as too broad and outdated. That’s a very likely target in this FLSA overhaul. take a look at everyone who is currently classified as exempt under this exemption. Your CEO’s not going to be racking up the OT anytime soon, but you can bet some of those on-the-fence folks will be.

And remember, these changes will impact not just employees and your corporate bank account. Be sure to give a heads up to everyone from Payroll to HR to supervisors that a shakeup is coming. After all, you’ll have to work with all of them to comply with the new rules when they arrive.

We’ll update you as soon as that happens.

Info: For the White House fact sheet, click www.whitehouse.gov/the-press-office/2014/03/13/fact-sheet-opportunity-all-rewarding-hard-work-strengthening-overtime-pr