Company Culture, Employee Engagement, HR Policies, Human Resources

Proposed FLSA Regulations: What They Mean for Employers


HRO Thumbnail 2014By Tusa McNary, HR Consultant

HRO Partners

Background

On June 30, 2015, the United States Department of Labor, Wage & Hour Division released to the public proposed regulations for the revision of the Fair Labor Standards Act (FLSA).  These proposed regulation changes were published on July 6, 2015 in the Federal Register.  They were available for public comment until September 4, 2015.  A date for implementation of the proposed changes is most likely to occur in 2016 between February and August.

What is proposed to change?

The proposed regulations will change the minimum salary level that has to be paid to a currently exempt employee in order for them to meet the first step of being considered “exempt” from being paid overtime.

The current salary level for an employee to be considered exempt is $455 per week, or $23,660 per year.  Obviously this is very low; in fact it is below the poverty level for a family of four.  Being paid on a salary basis at that level is the first test of being an exempt employee.  Another qualification for being considered an exempt employee is meeting the “duties” test where an employee must be performing certain duties as defined by their category of exemption.  These categories include the executive exemption, which generally includes managers and supervisors; the administrative exemption, which includes white-collar positions where the exercise of discretion and independent judgment is necessary; the professional exemption, which includes the learned professional, i.e., doctor, engineer, architect, teacher, and the creative professional, that person who exhibits creativity, imagination, originality or talent; the computer professional; and the highly compensated employee, this includes the individual earning more than $100,000 and performs some aspect of exempt duty; and lastly, the outside sales representative that has to meet no salary requirement.


The Proposed Changes

Rather than fixing a single salary level, the proposed regulations establish the new salary requirements at 40% of the weekly earnings of all salaried employees in the United States.  By the time this proposal goes into effect that level is anticipated to be $970 per week or $50,440 per year.

This means any currently exempt employee that is earning less than $50,440 will automatically have their exempt status removed and they will be overtime eligible as of the effective date of the changes.

If you are one of the companies that have highly compensated employees, under the proposed definition, this $100,000 compensation level will change to $122,148.

What needs to be done?

First, this would be a good time to review whether or not employees you have classified as exempt are truly exempt.  Too many employers make the mistake of improperly classifying employees as exempt solely on the basis of the fact that they pay them a salary.  Salary is a method of wage payment and not a classification of overtime eligibility.  There are numerous companies that have employees classified as non-exempt yet they pay them a salary.  Non-exempt employees do not have to be exclusively hourly employees.  So even if you have an employee who is going to make the $50,440 salary level they may not be properly classified on the nature of the duties required to be classified as exempt. If you have questions about a particular employee, HRO-Partners can assist you in making this determination.

Remember, titles don’t count. Determination is based on the job description and the actual duties performed.  If you have not updated your job descriptions lately, now is the time to begin the process.  HRO-Partners assist you in this process.

Preparation steps that need to occur NOW

    1. Identify all current employees that are classified as exempt (not currently eligible for overtime) that are making less than $50,440 per year.
    2. Determine how close these employees are to the threshold level.
    3. Determine how many potential overtime hours that employee worked in the past year.
    4. Calculate the cost of that overtime based on time and a half calculations.
    5. Determine if it is more cost effective to increase the employee to the $50,440 level or to pay the  anticipated overtime.
    6. For those employees where it does not make economic sense to raise them to $50,440, it will become necessary to determine how you will actually record their time worked.  Once these employees are declared non-exempt employees (eligible for overtime) you must accurately track actual time worked.
    7. Communicate the outcome of your research to your Management Team who can then determine budgetary needs.
    8. Institute a system of checks and balances to ensure that the behavioral change of tracking time has actually occurred.
    9. Monitor the annual Consumer Price Index to ensure that exempt employees remain exempt and whether further adjustments need to be made.
  • Develop a communication strategy as soon as possible. Involve your leadership team, managers, and supervisors. The message needs to be clear and concise.  HRO-Partners can also assist you in this process.

Additional considerations

Accurately tracking time of newly re-classified employees will also be important.  You can accomplish this using paper time sheets or you can use technology including mobile devices.  The important consideration is to find something your employees will adapt to most easily. HRO-Partners can refer you to any number of providers.

Issues not yet decided

The DOL also sought input on whether or not to consider nondiscretionary bonuses in the calculation of the total rate of pay.  Many companies utilize a pay system that might present a portion of the employee’s pay to be “at risk”.  In other words, their pay depends on the achievement of goals for which they can potentially receive sometimes large bonuses.  The proposed changes do not allow bonuses to be used to arrive at the $50,440 mark.

An additional issue involves sales positions.  Currently, inside sales have a high hurdle to meet to be considered exempt.  A number of companies have said that the realities of the world have changed the nature of sales such that outside sales representatives spend a great deal of time selling via the Internet and may not qualify for the old definition of sales exemption.

Contact information:

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Cordova, TN 38018
Call us at 1-866-822-0123

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business psychology, Danny Gattas, Employee Engagement, Employment, Engagement, Guest Blog, Human Resources, Kevin Sheridan, Memphis, Recruiting

The End of Employee Engagement? I think not.


Below is a recent guest blog from our esteemed friend, Kevin Sheridan, regarding the status of Employee Engagement.

UntitledThere was a recent article in Forbes asserting that the Employee Engagement Movement was dying on the vine or fading away, like the Total Quality Movement (TQM) of the late 1980s and early 1990s.

In my opinion, there are several flaws in what the article suggested.

First and foremost, the big “elephant in the room” is the fact that by most measures only about 30% of the workforce is engaged, with the remainder being either ambivalent or actively disengaged. Are we to roll down our sleeves and think this is an acceptable level of engagement for our businesses, industries, and countries, and give up that easily? I hope not. Literally all of the best-in-class customers with whom I have worked in my 30-year consulting career eschewed such a defeatist attitude, and rolled up their sleeves to work harder to become even better. (Sounds a little like TQM, huh?) These organizations never lost their undying commitment to the well-defined concept of engagement, and its core underpinnings.

Second, regardless of what engagement is called, those people that have it never lose their passion for what they do, and pride in where they work. These two “Ps” of engagement will always yield superior outcomes, such as net-promoter results, customer referrals, customer satisfaction, higher quality and safety scores, and profitability. Regardless of whether we get tired of the moniker “employee engagement,” the myriad positive outcomes it creates will never go away. (To read the most comprehensive summary of these business outcomes click here.)

Third, if as suggested in the article, engagement has become a “check-the-box” exercise, then why are we not holding the people checking the box accountable, as well as those accepting the checked boxes, as opposed to conveniently blaming engagement?

Featured Image -- 609Lastly, a much healthier, opportunistic approach to engagement has played out in the hundreds of organizations I’ve helped shepherd from the nadir of engagement to achieve best-in-class status. All of these world-class employers took the following steps which are not typically taken by those stuck at “average”:

  • They never gave up, but rather made a long-term commitment to real change and improvement.
  • They had CEOs who eagerly took ownership for leading the effort and expected others to own it with the same level of steadfast dedication.
  • They tailored both their measurement instrument and process to fit the demographic make-up of their workforce, as opposed to using a “one-size fits all” survey and solution.
  • Contrary the what the article purports, the vast majority of companies and the engagement vendors they choose, give and actually guarantee, complete confidentiality for their survey and process. Best-in-class organizations on engagement are no different.
  • They instilled complete accountability on their managers for ensuring meaningful action plans are not only implemented, but effectively communicated, such that all employees knew that they were heard and that meaningful changes had been made based on their opinions.

cultureThey encouraged employees to begin to accept ownership for their own engagement, as opposed to waiting to be engaged by their manager and/or employer.

  • They gave their employees a tool through which they could confidentially see how engaged they were in their job, as well as get suggestions on what they could do on their own to be more engaged.

All of these steps are important, but the final two are critical to long-term improvement. Given that the vast majority of organizations have yet to take these two critical steps, it is certainly no time to throw in the towel and give up on engagement.

The proudest moments of my career as a consultant in this area, were standing shoulder-to-shoulder with senior executives who announced double-digit or best-in-class scores on engagement survey results and asked their entire team to stand up and give themselves a thunderously-loud standing ovation. Nearly all of the ovations ended, with the CEO saying something like, “This is great, but we are not done yet. Let’s set a goal to be in the top 3% next year.”

Rest assured, William Edwards Deming’s concepts on quality, continuous quality improvement, and the Malcolm Baldrige Award, are all alive and well today. The term TQM may no longer be bandied about, but its foundation pillars still stand as tall as those for employee engagement.

Inspiration for this piece:

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Guest Blogger, Kevin Sheridan having fun and smiling as always!

 Kevin Sheridan is an Internationally-recognized Key-Note Speaker, a New York Times Best Selling Author, and one of the most sought-after voices in the world on the topic of employee engagement.   He spent thirty years as a high-level Human Capital Management consultant, helping some of the world’s largest corporations rebuild a culture that fosters productive engagement, earning him several distinctive awards and honors. Kevin’s premier creation, PEER®, has been consistently recognized as a long- overdue, industry-changing innovation in the field of Employee Engagement. His book, “Building a Magnetic Culture,” made six of the best seller lists including The New York Times, Wall Street Journal, and USA Today. He is also the author of The Virtual Manager, which explores how to most effectively manage remote workers.

Kevin received a Master of Business Administration from the Harvard Business School in 1988, concentrating his degree in Strategy, Human Resources Management, and Organizational Behavior. He is also a serial entrepreneur, having founded and sold three different companies. 

Contact Links:

Web page: www.kevinsheridanllc.com

Twitter: @kevinsheridan12

LinkedIn: http://www.linkedin.com/in/kevinsheridan1

Email: kevin@kevinsheridanllc.com

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