DOL’s Proposed Overtime Rules: Are YOU Prepared?
Business owners are experiencing all sorts of feelings after the Department of Labor announced the proposed overtime expansion rules this month. Whether those feelings are good or bad, for or against, it’s time we had a conversation about it and discuss some possible effects.
A brief overview of the proposed new rules:
The salary threshold to qualify as an “exempt” employee has remained at $455 per week, or $23,660 annual salary, since 2004. In this day and age that is below the poverty threshold for a family of four, and roughly 8% of salaried workers fall below that threshold. The proposed new rule would extend overtime protection to those who earn up to $970 per week, or $50,440 annual salary. (That’s an over 100% increase!)
Think about your staff—how many of your employees will now be eligible for overtime? What’s your plan? Do you plan to increase overtime pay? Will you increase salaries to keep an exempt status for your employees?
Let’s say you choose to move some or all of your currently salaried employees to hourly. You now need a timekeeping system to record their time worked. If an employee is moved from salaried to hourly, it can be a pretty big blow to his or her pride. An electronic timekeeping system, where he or she can login and punch in and out from his or her desk or mobile device rather than having to carry around a time card, will help soften the blow a bit. Another way to soften the blow: now they are eligible for overtime—i.e. time and a half! If a change must be made, make sure you highlight the positives.
Maybe you already have a manual timekeeping system such as time cards and pin numbers in place. While these can be effective, they can also be prone to error. Error could mean abuse such as “buddy punching,” or rounding too little or too much, and so on. Typically, errors in timekeeping lead to overpaying or underpaying an employee, which, in turn, can lead to a lawsuit.
Here are a few fun facts for the day:
- The American Payroll Administration estimates that the rate of human error in time card preparation is between 1% and 8%. Therefore, a 2% human error rate on a $12,000 payroll would equal $240 in erroneous wages paid per pay period.
- Did you know that just 15 employees receiving pay for merely 4 minutes of 'wasted time' per day will total 1,380 minutes (23 hours) of additional pay per month?
- The average payroll clerk spends 7 minutes per time card each pay period managing the following tasks:
-Preparing and handling time cards
-Verifying time card totals
-Reconstructing lost or damaged time cards
-Computing time card totals
-Computing shift and department totals
- Preparing 100 time cards will take an estimated 11.67 hours to complete. Therefore, at an average clerical wage of $15.00 per hour, time card preparation would cost $175.05 per pay period.
After reading all of that, doesn’t electronic timekeeping sound just peachy?! We suggest electronic, automated timekeeping systems to not only save you money, but to reduce error and save time. Studies have shown that companies who have adopted automated time and attendance systems have seen over a 50% decrease in payroll errors, which can be costly to resolve.
If these proposed overtime expansion rules take effect, employers need to prepare for the change, and consider how those changes affect your budget and employees.
If you have any questions about automated timekeeping or the DOL’s proposed overtime expansion rules, please give us a call at 410.451.4202.