Will Overtime Policy Rule Over You?
On December 1st, the new U.S. Department of Labor Overtime regulation will go into effect. White-collar salaried workers who make less than $47,476 annually will be required to receive overtime pay when they work more than 40 hours a week. This new provision, approved in May, doubles the current salary of $23,660. Workers who earn more than that are not required to receive time-and-a-half overtime pay. The minimum salary is scheduled to increase every three years, with the next increase in 2019.
Circumventing Congress regarding increasing the federal minimum wage, President Barack Obama stated, “I’m going to do what I can on my own to raise wages for more hardworking Americans.” Trey Kovacs, labor policy analyst for the Competitive Enterprise Institute added that the two main objectives are to “spread employment ... by incentivizing employers to hire more employees rather than requiring existing employees to work longer hours,” and to “reduce overwork and its detrimental effect on the health and well-being of workers.”
In response to President Obama’s avoidance of Congressional approval in changing the federal wage structure, the Republicans in Congress are sponsoring two competing resolutions: one that would kill the Overtime Policy regulation entirely and another that would send the Labor Department back to the drawing board. Their intent is to address the inefficiencies and headaches for businesses, schools and nonprofits that will have a very difficult time responding to the new regulation without major costs that simply can be absorbed without passing the costs to consumers, students or eliminating non-profit services.
However, no one is banking on an adjustment in the Overtime regulation. Companies nationwide have responded in different ways on how to address this change. Depending on their own business model and approach, each plan is designed to minimize the impact on the bottom line. Whether the new Rule was specifically designed to force large corporations to compensate for overtime hours or for all employers, small business owners will have a much more difficult time handling the extra workload and costs associated with this change. From a salaried worker’s perspective, depending on one’s perspective, the change could be a windfall in compensation or a limitation on flexible hours such as personal time off for family events (concert, parent-teacher conference, working from home, etc.).
With the salary level of many funeral directors, especially those who are new to the profession, falling under the range of the new threshold, funeral homes will have the additional burden of meticulously tracking workers’ hours, in dollars or hours worked. In a business that operates 24/7, 365 days a year, this will be a challenge.
Obviously, the death care industry is not a 9-to-5 job and rarely is it an even 40 hours a week. So, how does one comply with the new Rule? How can your business minimize the overall impact while maintaining a continued level of quality for the families you serve and the staff you have on board? While efficiency is the one area that needs to be reviewed first, most businesses have already gone through this exercise in recent years, which now requires alternative responses.
Let’s take a look at some popular options being considered and the potential side effects of each:
INCREASE SALARY Consider increasing the salary for an employee above the threshold to save on overtime costs. Again, workers who make more than $47,476 are not required to receive time-and-a-half overtime pay. These exempt employees will earn more but they are susceptible to overtime hours which in time, could hamper their personal time and create burnout.
It is important to note that simply increasing the salary may not make the position exempt from overtime. The position must also meet the duties tests as outlined in the White Collar Exemptions from the Department of Labor.
Business owners and managers who are already above the threshold may experience an increase in their own workload if they have to take on the responsibilities that other employees no longer have time to accomplish. For many of you, that’s not a welcome thought.
To offset the higher wages, an employer may consider elimination of another position (part-time, for example), pass the costs on to the customer or cut other optional benefits such as quarterly or year-end bonuses.
DECREASE WORKLOAD To avoid exceeding the 40 hours-per-week ceiling, a business may decrease and reallocate the duties of the employee.
Those duties will need to be addressed another way—either by another employee, serviced outside the business or eliminated altogether. We’ll detail that later.
Determining how long each duty may take to accomplish and what to prioritize does take some planning and we’ll discuss that later as well.
ADD TO STAFF As mentioned above, hiring a part-time person to handle any additional duties no longer done by the current full-time employee(s) is an option. This addresses the current needs of the business with minimal or no loss of quality and delivery.
Just what duties to have this part-time person complete along with when, needs to be determined. Considering that many funeral directors have specialized tasks that are not easily duplicated and may occur at odd hours could present a challenge. Every funeral home operates a bit differently so a review and plan will need to be completed.
UTILIZE EXTERNAL SUPPORT Using specialists for tasks that can be done well while efficiency, quality and service are maintained is a good option, especially if it minimizes the bottom line. Third party partners can assist in everything from grounds keep and facility services to adding services that offer potential new revenue streams such as higher quality products, tribute videos and personalization services.
Partnering with a consistent and reliable service that reflects your standards creates flexibility in all your core responsibilities of handling family deaths that can occur at any moment. Financially, using a contracted or outside service protects you from overtime hours as well as employee taxes.
UPDATE TECHNOLOGY Before eliminating a service, consider technology upgrades that can quicken paperwork, lessen duplicity and minimize mistakes. Office programs and project management software reduces the workload and offers faster communication internally and with your families.
The short-term downside may be the upfront cost and training ramp-up time associated with any new equipment, while the long term benefits can increase efficiency.
ELIMINATE SERVICES To make such a decision needs to be clearly studied. In most cases, you can identify those tasks or services you offer that either cost you the most and/or offer the least amount of return. But be careful, not to look at a direct ROI—it’s difficult to directly correlate ambiance or your funeral service experience to a financial return.
The elimination of any service can be detrimental, short and long term. For example, do you change to artificial flowers versus fresh ones? Or wait an extra 15,000 miles on your vehicles before trading them in? Do you stop compensating your employees for the business attire you require them to wear? The question is simple, what can you do without that will not affect your revenue stream, today, tomorrow and next year? That’s the last thing you want to do. Not only does it erode your reputation within your market, it eventually will put you at a competitive disadvantage.
WHERE TO START Since the consensus in the new Rule is not going away, the sooner one faces its impact, the better. With just three months from implementation, that’s not a lot of time to prepare.
1) Review and assess the duties and time management of all your employees, hourly, salaried and exempt.
2) Determine whether those duties assigned to each employee can be performed within the structure of a 40-hour work week.
3) In review of each employee, if the duties require more than 40 hours per week, consider these options: remove or reassign duties, alter the employee’s compensation to meet compliance, add staff; or accept and compensate for the overtime hours required.
For better or worse, whether the business owner or the salaried employee, this new Rule changes the landscape—more workload for employee tracking along with increased payroll costs while the employee may experience more pay, work less hours but have less flexibility in juggling their work schedule with their personal life.
The Overtime Rule is coming but you can minimize its impact with the right planning—for you, your staff and your families. Be ready December 1st.