Brian Garrett, Compliance Research Analyst at Ultimate Software, notes that “the new FLSA ruling is prompting many organizations to change the way they do things, especially time tracking and payroll.”
Preparing for and implementing new processes to ensure compliance is a key component to an organization’s ability to successfully manage their time, attendance, and payroll records.
The ruling redefines the salary threshold to a higher benchmark for exempt status classification. Organizations will have to re-categorize members of their workforce. This ruling extends “the right to overtime pay to an estimated 4.2 million workers who are currently exempt,” according to the U.S. Department of Labor.
Newly nonexempt employees will now have to manage their time, track their time, and potentially ask for permission to work overtime.
Communicating these changes to employees should be clear and concise. It may be beneficial to hold time and attendance tracking training for newly nonexempt employees who have never had to track their time before.
Knowing who to track, why to track, what to track, and how to track time, attendance and payroll, is important information to know when implementing the new ruling. Here’s a few key takeaways about how the FLSA rule will affect time tracking and payroll:
Time tracking and payroll recording benefits employees and employers
“From the employer’s perspective, having to time-track more employees is seen as an administrative burden,” according to Garrett.
However, Garrett also points out that “tracking time, attendance, and payroll protects employers in the case of an audit.”
It also may help organizations protect themselves in legal cases when there is a discrepancy on time, attendance and payroll records.
“One of the most common lawsuits is the wage and hour lawsuit, where employees claim that employers have not paid them for all hours worked or for owed overtime,” according to SHRM.
The newly nonexempt employees also benefit from time tracking and payroll recording. According to Garrett, “it protects employees in making sure that they are getting paid correctly.”
Although it may seem like a burden to both parties, it is mutually beneficial to both the employee and the employer.
Know who to track
It is important to first find out who the nonexempt employees are and prep for compliance. This is possible by conducting an analysis to identify employees near the $47,476 threshold and conducting a time study to determine which potentially impacted employees work more than 40 hours per week.
To prepare for the potential effect on payroll, perform a market analysis to see if pay levels are competitive for potentially impacted employees, update salary budgets to account for potential increase in overtime, and, as always, consult legal counsel to ensure compliance with the new rules.
Include payroll in on the discussion
Tracking time, attendance, and payroll is a shared responsibility between the employee, the manager, and the payroll department.
Garrett stresses to “make sure payroll is a part of the conversation when the organization is doing their deliberations and determining the best way to manage these changes.”
If an organization has a significantly higher number of employees they have using their time and attendance management system, it may have a noteworthy impact on the payroll process.
Implement redundancies in the time tracking process
“The most time-consuming part for the payroll department is making sure all timecards are approved by the supervisors. With an increase in the number of employee timecards needing approval, it is important to make sure that there are redundancies during the approval process,” according to Garrett.
If you have a policy that requires employees to seek authorization from management to work overtime, both parties must accurately report that in the time and attendance system.
It is important to ensure that all individuals report accurate data and to have an integration in place between the time and attendance management and payroll systems.