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Upcoming Overtime Regulations Impact All Businesses: Are You Automated?

By Michael Benedict on August 2, 2016

Upcoming Overtime Regulations Impact All Businesses: Are You Automated?This year, the Department of Labor (DOL) released a long-anticipated, substantial update to the Fair Labor Standards Act.

This update changes which employees are classified as exempt — and the changes will surprise a lot of SMBs. As a result, some salaried workers — who previously didn't have to track their hours — are now eligible for overtime and will have to punch in and punch out.

This will have big implications for many small companies, especially those with workers whose salaries are near the new threshold of $47,476 per year. And these changes go into effect December 1, 2016.

Employers will spend a collective $592.7 million to comply with the new rule, according to DOL estimates. That includes $160.1 million to make necessary adjustments and $178.1 million in managerial costs, reports the Society for Human Resource Management.

But not getting up to speed on the new overtime regulations can cost you more. Various estimates say that up to 70 percent of businesses are not in compliance with even the current FLSA, and in recent years, the most lawsuits related to wages have come from employees who have been misclassified as exempt, thus missing out on overtime.

December 1 is not far off. Here's what to do now and why automating timecards will be crucial to your success:

Automating Timecards for Better Time and Overtime Tracking

  • First, find out which of your employees are covered by the new rule.  Any employee previously exempt from overtime making less than $47,476 is covered. (Also — note that any state labor laws that are more generous to employees supersede the new federal rule. Check with your attorney for more info on state-based rules that may affect your business.)
  • Next, start tracking their hours. “Many employers do not currently track the number of hours their salaried employees work. If you do not track these employees’ hours, you should begin doing so immediately,” Stacey Browning, executive vice president and chief strategy officer for Paycor, told AccountingWeb. Even though the rule doesn't go into effect until December, it's important to have a baseline record of their hours.
  • Once you have a handle on how many hours these employees are working, you can begin to make financial decisions. For example, an employee making $40,000 a year in salary but who regularly works 10 hours a week in overtime would get paid approximately $15,000 in overtime over a year. It might be better for your business to simply raise that employee's salary to the threshold.
  • Finally, get a strong system in place. Paper-based timecards and timesheets are no solution for the 21st century, can slow down internal process, leave huge margins for error, and, starting December 1, leave you vulnerable to lawsuits.

An accurate, digital, cloud-based time and attendance system will keep your business moving forward in many ways and protect you from wage-and-hour lawsuits related to the new rule.

With GoCanvas, time cards/time sheets can be filled out directly from an employee's mobile device, and with Canvas' new Workflow tool, the timecard automatically gets sent to the correct supervisor's device, so they can look it over and sign off on it immediately. Further, all employee time-sheet data can be automatically linked to your business’ accounting software.

AccountingWeb says that a digital time tracking system offers the following benefits:

  • Accuracy: This is important, since as a result of the new regulations, employers will have to pay their salaried employees who are below the new threshold for any overtime hours worked.
  • Audit trail: If an employee reports your organization for not following the new regulations, the Department of Labor will audit your business. Canvas’ Workflow tool and automatic cloud storage provide the documentation you need, at a moment’s notice.
  • Decision support: As you consider how you will handle each employee’s labor situation, you will need to have accurate employee time data. The number of hours they currently work directly impacts how you choose to handle their compensation.

Further, analysts at The Aberdeen Group calculated that companies that switch to an automated attendance system (“automated” here simply means that employees have the power to enter in their own attendance records and that supervisors can approve their timecards easily) reap huge benefits including a 100 percent increase in human capital ROI. And perhaps most relevant for the new overtime rules, companies that used an automated leave management system — where employees can request days off without having to check in with a central gatekeeper — saw a 32 percent reduction in unplanned overtime.

Forbes suggests that having an automatic summary of an employee's hours worked “can help payroll professionals see who’s approaching their maximum number of hours, and then alert their supervisor to approve the overtime or shift the hours to another employee.  This may help balance the number of hours each employee works and potentially minimize or avoid overtime.”

Canvas's new Workflow feature, combined with their mobile time cards/time sheets, makes it easy for companies to set up automated systems. Supervisors will be notified immediately as soon as there's a timecard for them to approve, and they can also approve or make changes right from their tablet or phone. Vacation request apps work the same way — employees can make requests from anywhere, and a supervisor halfway around the world can approve or deny the request from anywhere.

With the new overtime regulations right around the corner, now is the time to move to mobile timecards and timesheets with workflow. Try Canvas for free today.