May 29, 2024

This paid piece is sponsored by Alternative HR.

In recent newsletters to clients, Alternative HR, an outsourced human resources provider based in Sioux Falls, has noted employment changes being initiated by a variety of agencies, including the Department of Labor, Equal Employment Opportunity Commission, Federal Trade Commission and National Labor Relations Board. That’s on top of several other changes passed by individual states.

Julie Nelson, HR senior consultant and compensation specialist with Alternative HR, said one of the big changes has to do with exemptions from overtime rules.

In April, the Department of Labor announced changes to the rules in the Fair Labor Standards Act that will force employers to increase pay for at least some of their exempt employees.

To be classified as exempt, employees must perform certain job duties and must be paid at or above minimum salary requirements set by the Labor Department. Those minimum salary requirements are increasing from $684 a week to $844 a week on July 1, and up to $1,128 a week on Jan. 1, 2025.

Nelson said these changes mean that employers need to do some quick planning to stay compliant with the federal regulations. “Between the two increases, July and January, the minimum salary requirement goes up by 65 percent,” she explained. “That will have an enormous impact on a lot of employers’ budgets.”

Nelson has been with Alternative HR for 12 years and assists clients in both the public and private sectors. She works with a wide variety of employers, helping with everything from day-to-day HR issues to establishing strategic HR plans, including compensation and benefits planning.

Overtime rules are part of the Fair Labor Standards Act, enforced by the Department of Labor. While most workers are eligible for overtime pay when they work over 40 hours in a week, there are exceptions. Executives and managers, administrators, professionals, outside sales workers and certain computer-related occupations can be exempt from overtime if they meet specific criteria and are paid at a certain level.

Michelle Blewett is also an HR consultant and compensation specialist with Alternative HR and has been with the firm for three years.

“There’s a common misconception that salary is the only component that determines if an employee is exempt from overtime,” she said. “It’s not just about meeting salary requirements — there are other factors to consider for employees to be exempt from overtime.”

Back in 2016, the Department of Labor proposed a significant increase in the minimum salary level. That was blocked by a federal judge, and the DOL later implemented a much smaller increase. There are fewer indications this time around that the current proposal will be blocked by the courts.

The current increase means that employers need to review who they classify as exempt and how much they are being paid. According to Blewett, whenever the DOL makes changes to overtime regulations, even if only to the salary component, it’s important to review job duties as well.

“Interpreting the duties test can be complex. Job duties may not always neatly align, leading to potential misclassifications and compliance issues for employers,” Blewett said, adding that as jobs change and evolve over time, classifications may become outdated.

Alternative HR recommends that employers first identify everyone on their team who is classified as exempt. Then, reverify that those individuals actually perform the job qualifications required. And finally, review individual wages to make sure they comply with the new regulations.

“Compensation gets very personal to both employers and to employees,” Nelson said. “We are already getting calls from a variety of businesses and associations asking to help them review their options.”

For workers whose pay needs to be adjusted, there will be two primary solutions. One solution is to reclassify those individuals as nonexempt and pay overtime when it’s worked. The other solution is to increase their base salary above the new minimums. Both solutions are projected to increase employer labor costs.

When working with employers on this issue, Blewett explains, “I work to explore options available and collaboratively determine the best course of action for both the employee and the employer.”

Regarding the overtime changes, the Department of Labor estimates that 4 million workers nationwide will benefit from its actions.

Nelson noted that the Labor Department also is changing the rules for “highly compensated” employees.

“Basically, if you pay a person enough money, they don’t have to meet as many criteria in order to be considered exempt. But that threshold is also increasing by 40 percent,” she said.

Alternative HR provides compensation and benefits analysis for its clients and creates pay ranges and pay plans for many of them. Nelson said there will be ripple effects with these Department of Labor changes.

“When an employer is forced to change some wages, they need to look at who else may be impacted and what other positions may need to be adjusted,” she said.

Alternative HR will host a webinar June 6 about the changes to overtime regulations and will include a time for questions and answers about the topic. For information about the webinar, visit alternativehr.com.

Oh, and what about those other employment changes mentioned earlier?

Nelson explained that in addition to the overtime changes, the recent PUMP Act, Pregnant Workers Fairness Act and the Speak Out Act impact employers.

“The FTC is trying to ban noncompete agreements, the National Labor Relations Board is trying to increase joint employer liability for employer mistakes, and several states have new laws related to paid leave, discrimination and pay transparency,” she said.

“But don’t worry,” Blewett added. “We’ve got a team that can help with all of that!”

To find out more about Alternative HR services and solutions, go to the website at alternativehr.com, or call 605-335-8198.