DOL Overtime Rules – HR Technology Impacts & Unintended Consequences

Unless you’ve been hiding under an ACA rock the last several months, you have likely been pulled into conversations with your clients about the new DOL Overtime Regulations. These rules are slated to go into effect on December 1, 2016 and, while there is a lingering hope that there will be a delay or adjustment, we are encouraging clients to proceed as if there is no delay. As a result, are now within a 40 day window of having tens of millions of US workers impacted by this new legislation (some negatively, some positively) as well as nearly every employer group. Unlike the Affordable Care Act, the initial review and analysis of this legislation has been less of a technology-driven exercise than it has been a policy-driven one. With ACA, employers were searching for technical solutions to help identify eligibility for variable hour employees, facilitate pay or play decisions, and produce the requisite IRS Forms 1094/1095. With these DOL regulations, employers have been forced to look inward at their pay policies, job descriptions, and classifications of their hourly and salaried workforce. That said, as policy-oroiented as the upfront analysis has been, technology will ultimately play a critical role in helping employers operationalize their new policies – capturing employee’s time, producing new overtime calculations, and reporting on the financial/budgetary impact. Several technology companies have even developed upfront calculators to help an employer assess the potential impact to their bottom line. Here is a rather simple one from ADP: We have been working with several employer groups over the last few months helping them leverage their current technology to help develop a plan of attack for this unique legislation. Throughout these discussions, we have run across several unintended consequences that I’m sure your clients are experiencing, as well. Some of those unintended consequences are… – Lower-waged, exempt employees have developed a false understanding (aka, hope) that their base pay will automatically be increased to $47,476 effective December 1. Many of these employees are simply awaiting their employers to communicate their higher wage — a government-induced Christmas Bonus, in their eyes. Unfortunately for all, the solutions being considered and/or implemented by employers will almost certainly not include an automatic pay bump for all exempt employees to the new $47k threshold. It is simply not a sustainable business model for an organization to absorb 20-30%+ pay increases. – Many employers are considering a migration of exempt employees that are below the new $47k threshold to a non-exempt status. Trust me when I say that the vast majority of exempt employees do not see this potential outcome coming. For decades, employees have set goals to transition from an hourly employee to a salaried manager — a sure sign that they are progressing and moving along the corporate ladder. Right or wrong, they have assigned a status to becoming an exempt employee. However, if this strategy is deployed by an employer, there will be some employee engagement issues and employee relations issues that stem from such a move, even if such a move is an appropriate one for the organization. – In addition to the financial and engagement issues that employers will face, they will also be charged with implementing some form of a time tracking system to capture time for their newly minted non-exempt employees. The size of this new non-exempt population will dictate the formality and automation of the time and attendance system. While you may not yet have been pulled into a specific conversation with your clients about this new legislation, it is important for you to know the struggles that are upon them. And, unfortunately for all of us, we are on the very front of this regulatory tsunami, as the upcoming election will most certainly create additional regulatory hurdles to clear.

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