New federal rules that took effect January 1 are expected to expand the pool of overtime-eligible employees by more than 1 million. With no exceptions for nonprofits, some are looking for ways to avoid overtime liability. Particularly eager are organizations with tight budgets that didn’t anticipate such costs. Here are some strategies to cut overtime hours.
Increase salaries. The rules raise the salary level for overtime exemptions for managerial or professional employees to $684 per week, or $35,568 per year. If employees’ salaries fall just under the threshold, it may cost less to raise their salaries if they work a lot of overtime (under federal law, more than 40 hours per week) rather than pay for the additional hours.
Redistribute workloads. You can shift what would qualify as overtime hours away from employees who were exempt from overtime pay under the previous rules but now are nonexempt.
Bring in new employees. In some situations, you may reduce your payroll liability by hiring new employees to reduce or eliminate overtime hours.
This also is a good time to ensure your exempt employees satisfy the job duties test for their exemptions. The administrative, professional and executive exemptions each have detailed requirements for the actual work performed.
The revised overtime rules appear to be here for the foreseeable future. Make sure to incorporate any related increase in your labor costs in plans.