11 Jun 9 Key Elements of an Overtime Policy
The Fair Labor Standards Act (FLSA) was originally created in 1938. Since that time, the FLSA and Department of Labor (DOL) regulations have governed the provision of overtime in the United States.
In April 2024, the FLSA received a major update for the first time in years. The updated regulation has changed the minimum salary that exempt workers must be paid. Now, an overtime-exempt employee must be paid at least $58,656 per year to remain exempt.
Thanks to this update, this is a good opportunity for companies to review their existing overtime policies. You can update your employee handbook and HR manuals with guidance on how overtime pay and salaried positions will be handled in the future.
The 9 Most Important Parts of an Overtime Policy
As you determine what kind of overtime policy your company will have, it’s a good idea to think about some of the following elements. You should determine which employees qualify for an overtime exemption and how you want to train your workers on your new policies. Ideally, you should incorporate the updated policies into your onboarding materials so that new employees immediately know what to expect.
1. Determine Exempt Classifications
To see which employees qualify for an overtime exemption, you must figure out if their job description is exempt. Administrative, professional, computer, outside sales, and executive workers are exempt from overtime.
If you are uncertain about whether your employees meet this exemption or not, you should read through the DOL’s explanation of job duties. For instance, an executive employee must manage the enterprise and be able to hire or fire workers. If you aren’t confident about an employee’s status, you can consult with an HR professional or employment attorney.
2. Pay Exempt Workers the Correct Amount
One of the reasons why the new FLSA salary minimum was adopted is because some restaurants and retail shops classified low-level managers as managers so that they could work longer hours for less money. Because of the change to the law, worker misclassification may go in the other direction. Instead of misclassifying non-exempt workers as exempt, some businesses may try to classify exempt workers as hourly employees in order to save money.
If the only reason a company changed an employee’s classification was to avoid paying a minimum salary, they may end up getting in trouble with the DOL. In one case, the DOL fined restaurants $68,270 for denying workers overtime, so it’s a good idea to follow DOL regulations as closely as possible.
3. Add Overtime Guidance to Your Employee Handbook
A company overtime policy can help your business prevent overtime abuse and ensure proper compensation. It also helps your company stay in compliance with legal requirements. By adding it to your employee handbook, you can make it easier for employees to understand and follow the policy.
4. Review Overtime Guidance With Your Employees
For your overtime policy to be effective, you must make sure that your employees are aware of it. You should make sure everyone at your company reads through your updated policy. Afterward, you can incorporate your overtime policy into your employee onboarding materials so that new hires can easily access it. You are also legally required to post the FLSA’s minimum wage poster in your workplace.
5. Get Signatures During Onboarding
As a part of the onboarding process, it is a good idea to get new hires to sign off on each part of their training. If there is ever a question about it in the future, you’ll be able to prove that the employee was properly trained on everything.
6. Be Stringent About Clocking In and Out
In response to the new FLSA minimum salary, some workplaces will likely try to switch salary workers to hourly pay. If this occurs, it’s important to review policies for clocking in and out with hourly workers. When someone is used to earning a salary, they don’t worry about staying late to chat or showing up early for coffee. Once they become an hourly employee, they need to remember to clock in when their shift actually starts and avoid getting unnecessary overtime.
7. Set Boundaries Around Media, Phone, and Email Usage
Another common problem employers have is with media, phone, and email usage. When someone is salaried, they might not mind sending a text in the evening.
However, this is problematic when you’re dealing with hourly workers. As soon as you send a text or email with a question, you are effectively putting that employee on the clock again. Because of this, managers should be trained on email, phone, and media policies.
8. Communicate Effectively
No matter what overtime policies or salary rules your company adopts, you must be careful about how you communicate them. For example, you should be transparent if you are changing salaried workers to hourly pay because of budget constraints. You don’t want employees to misunderstand why the switch is happening.
To avoid overtime compliance issues, you should make it clear to managers that no one is allowed to work off the clock. Overtime abuse is never allowed among employees, and managers must also be discouraged from allowing off-the-clock work.
9. Train HR on What It Takes to Make Someone Exempt or Non-Exempt
Your HR department is your frontline defense against overtime violations. Because of this, it is important to incorporate overtime guidance into HR training programs and encourage HR team members to stay up-to-date on new developments.
How the 2024 FLSA Rule Impacts Your Salary Employees
Because of the 2024 FLSA rule, companies will need to pay their employees a higher salary or make them non-exempt. This is one of the largest changes in years, so it will take time and planning to accommodate the higher salaries. By updating your overtime policies now, you can prepare yourself for the FLSA update.
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.