Employees' Benefits and Their Morale May be A Casualty of the New Overtime Law
The new overtime rule, released this past May will take effect December 1, 2016. We all have been apprised of the new salary threshold for exempt positions ($47,476) and are aware of the duties test that determines a true exempt position vs a non-exempt, which will ultimately result in additional OT to be paid to non-exempt staff working in excess of 40 hours. But are we also aware how this may impact employee’s benefits?
Businesses, especially those smaller in size, will already be hit with a financial strain as they will be required to pay OT and increase the salaries of exempt staff to meet the new threshold. This amount is more than double the old threshold. So where is a business to acquire this additional funding to support these salary requirements? You guessed it. Directly from the extras given to employees.
Medical benefits must remain intact, as the Affordable Care Act (ACA) regulations have mandated that medical benefits cannot be varied by employment status (exempt vs non-exempt). However, it is the ancillary benefits that could be affected. Benefits such as dental, vision and disability coverage are areas that could suffer. With the onset of higher wages and overtime payments due to the new OT ruling, employers will be faced with cost-saving decisions for their company. Employer’s will need to review if maintaining the ancillary benefits makes sense to maintain. Should employers shift the cost to the employees, or simply just eliminate it?
Organizations can easily become focused on the financial impact that the new OT ruling will have on the company. Their first reaction may be to cut certain benefits. However, one must analyze the bigger picture; the cost of reducing benefits could also have a negative impact on the organization that will end up costing more. For example, reducing ancillary benefits may result in low morale and subsequently, employee turnover. This will in turn lead to the loss of a competitive advantage in your industry and consequently, the costs affiliated with recruiting top talent.
Are there options an organization can consider, in order to remain compliant with the new wage requirements, yet maintain operating within budget and not lose competent staff? The answer is yes. For example, you can attract and retain talent by offering flexible scheduling. There are many types of offerings that don’t impose upon the costs of operating and/or benefits.
HR Strategies, LLC helps organizations navigate these and other workplace challenges and develop solutions to keep your company compliant and operating at its very best.
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