FLSA Compliant Employee Timekeeping Systems for Small Businesses Under the New Overtime Rules
Under the new FLSA overtime rules, employees must meet certain criteria to be considered exempt from overtime pay. As before, they must satisfy the DOL’s executive, administrative or professional job duties tests. Next — and this is the key change with the new rules — they must receive a minimum of $913 a week (or $47,476 annually) on a fixed salary basis.
The new salary threshold alone will mean millions of workers previously paid a salary with no overtime will no longer qualify for exemption. Instead, they will need to be reclassified and receive overtime pay for all hours worked over 40 in a week.
Besides the impact on payroll, the new overtime rule will require specific timekeeping requirements for employers.
What does your timekeeping system look like?
Time tracking is not optional. By law, you must keep accurate time records for all non-exempt employees. In addition, the law places the burden on you – not the employee – to prove how many hours are worked each week. If you don’t have strict timekeeping rules and accurate records, and you get challenged, it becomes a “he said / she said” situation.
Employees can say they worked on the clock from home or on the road – or that they came in early or stayed late – and you will have to prove otherwise.
What the law doesn’t specify, however, is the method you use.
You can rely on traditional time clocks that require employees to punch in and out, or a paper system where employees turn in time sheets (or scan and email them). Better yet, you can upgrade to a modern online system where employees submit information via their computers or mobile devices.
Options for Employee Timekeeping Systems for Small Businesses.
Think about something other than a traditional time clock station when you’re looking into timekeeping procedures, it makes sense to go with something more discreet than a traditional time clock station. Why? With the new salary threshold and reclassification, employees may make assumptions about each other’s pay.
For example, they may figure that anyone punching a clock makes less than $47,476 a year. Though this may not be the case, anything you can do to prevent this type of speculation among your staff is a good thing.
Timekeeping training for non-exempt employees.
There’s a lot you’ll need to share with newly non-exempt employees regarding their work hours and proper timekeeping. In your training with affected employees, you’ll want to cover:
Your overtime approval process
Limitations on off-the-clock work, like checking emails from home
Restrictions with comp time
How to report hours
How to handle changes or corrections
As a best practice, consider putting all your timekeeping rules in writing – and distribute them as a policy for employees to sign to acknowledge they’ve read and understood it.
Provide timekeeping training for managers and supervisors, too.
Just as important as employee guidance is training for managers and supervisors – the people who will oversee the work of newly non-exempt employees. Your managers and supervisors can make or break your FLSA compliance.
If they don’t manage time issues closely – such as not enforcing mandatory breaks, allowing off-the-clock work, or writing off unauthorized OT — they put your business at risk. They need to understand the basics of the law and their responsibility for enforcing the rules.
Remember: Even if managers tell employees not to work overtime…
You must pay time and half for 40+ hours if you knew or should have known the overtime occurred. This is true even if an employee volunteers to do the extra work off the clock. Basically, the law says if you don’t want to pay overtime, you must be absolutely certain the work isn’t performed. Otherwise, you have no choice but to pay it. You may discipline the employee, but you can’t withhold the additional pay.
Realize, too, that managers and supervisors may need to step up their efforts – at least in the early stages of the new rule – to ensure everything is in order. They may need to do more to allow uninterrupted breaks, monitor workloads and schedules to control overtime, and manage time and productivity in general.
Finally, it’s smart to develop a separate policy that covers requirements for managers. Have them sign the policy to verify they understand their roles with FLSA compliance.