How the New Overtime Rule May Impact Staffing Firms

FLSA Overtime Rule SpreadsheetUpdate: In a ruling on Nov. 22, 2016, a federal court issued an injunction on the U.S. Department of Labor’s recent overtime rule. The date of effect, which was scheduled for Dec. 1, is now postponed indefinitely. 

The new Federal Labor Standards Act (FLSA) was announced on May 18, 2016 by the Department of Labor (DOL). This act requires that employers pay eligible, non-exempt employees an overtime premium of at least 1.5 times their regular rate of pay for hours worked over 40 in a workweek.

For some businesses, this act will simply require a little more careful eye when it comes to tracking hours. Not much will change.

For other businesses, this act may require increased payroll costs and extended record keeping.

And for still others, they may find that it’s easier to change their current model on how they pay, how they hire and how they utilize staffing agencies to fill in the gaps. [more]

So what does this mean for your staffing agency? Here are three things to consider:

  1. You may need to start paying overtime to your own staff

According to the new law, if you are paying up to a maximum salary of $47,476 per year to any of your own staff members, they will be eligible for overtime, regardless of their managerial status. You will need to keep careful track of hours and your record keeping efforts may significantly increase if your staff often works more than 40 hours per week.

(Note that cost of benefits are not included in the salary threshold.)

  1. You may need to readjust work hours, salaries, record keeping and staff workload

Some businesses may find that it is easier to simply change the way in which they pay their employees. For example, it might simply make more sense for a business to extend a small pay raise to their employees so that they make more than $46,476 per year.

Or, some businesses may find that it’s better to move salaried employees to hourly pay (at least minimum wage) and then limit overtime hours. Or, still other companies may find that it’s better to hire two individuals to take up the workload that one person was formerly managing through overtime. For instance, one new hourly employee would handle twenty hours a week of the job, while a salaried employee would handle 35 hours a week of the job.

No matter how each business approaches the changes in the law, keeping careful track of employee hours will be extremely important for employees making less than $46,476 per year in salary, or for any hourly employees.

  1. You may notice an increase in business from current or new clients

As you make your own adjustments (if necessary) to your own day to day operations, companies all over the country will be making similar adjustments in how they pay and recruit talent. These steps could mean a significant increase in sales for your business.

For the same reasons that your business may adjust how you fairly compensate employees and regulate overtime, other companies may find that hiring temporary staff to mitigate overtime needs is in their best interest. Salaried employees below the $46,476 threshold who regularly work more than 40 hours a week could benefit from one or two temporary workers who can help to alleviate their weekly workload without a company needing to hire a new employee.

In industries where overtime is the norm for entry level salary positions—like legal, advertising or healthcare—reaching out to staffing agencies may be their best option to keep overtime costs and record keeping time down. Be ready for an influx of business before and after the December 1, 2016 implementation deadline.

You may also notice an increase in business from companies you may not have worked with before, such as non-profit organizations or religious groups. Under the new law, as long as a business has annual sales or business of over $500,000 (business operations only), they must comply with this law.

Advance Partners understands staffing agencies and works alongside you to help your business grow. If you have questions about the new overtime rule, or need assistance with recordkeeping initiatives or handling an increase in business, contact us for a free consultation.

(The information from this article was provided by Paychex.)