By: Jonathan Benhamou
Since 1938, the Fair Labor Standards Act (FLSA) has required most employers to document their employees’ wages, hours and other employment practices. Human Resources (HR) professionals know that under the current guidelines, job titles need to align with appropriate responsibilities and compensation, otherwise companies may leave themselves exposed to employee lawsuits for overtime pay. Tracking job classifications is critical to eliminating this liability and, according to the Society for Human Resource Management, employee status is reviewed by 53 percent of HR departments when a position comes open, and annually by 39 percent. Only two percent review it as often as monthly. However, if the U.S. Department of Labor (DOL) amendments to the FLSA proceed as expected this year, that employee classification tracking is going to change significantly.
Forthcoming DOL laws could soon make already lengthy paper trails much longer for HR departments if they have not yet moved to a digital document management system. The new laws have the potential to almost double the salary threshold under which employees are entitled to collect overtime, from $23,660 to $50,440 annually. In addition, the laws may change the job duties needed to qualify as exempt and are also anticipated to increase the salary threshold for exempt “highly compensated employees” from $100,000 per year to more than $122,000 per year. Likewise, the DOL will scrutinize independent contractors more closely, as many that should be considered employees because of their economic reliance on an employer may have been misclassified as otherwise. Needless to say, these new rules would require HR to review job classifications much more frequently and to provide notifications to employees based on re-classifications.
Automating this workflow through digital document management is one of the best ways HR departments can protect against the potential negative impact on productivity from the new overtime laws. In fact, the increased productivity from streamlining the paper-heavy process for disseminating information to employees related to their classification will be monumental. But the benefits extend beyond the significant time savings.
Easier Auditing of Employee Job Duties and Time-Tracking
The ability to easily search employee files by job classifications, salary levels and job duties can greatly ease the burden of compliance challenges. The new laws will require greater scrutiny of not only how much exempt employees are paid, but also the job duties they perform. Since the workforce is constantly evolving and job duties can change quickly, the best way to monitor whether duties and classifications align with all laws is to perform frequent employee audits. What if a change in title, compensation or job responsibilities triggered an automatic notification to HR? It’s not far-fetched to imagine or for that matter, to implement. With the right technology, employee audits are actually simple. And with more frequent audits, smart HR professionals can deem if employees are crossing any lines based on their current duties and classification, reducing employer risk.
The improved transparency that technology supports can also help managers prepare for the changes from the new overtime laws by helping them to determine whether they are currently accurately tracking their employees’ time, and, if necessary, to make changes to improve that process.
The right technology can not only insulate HR departments from the new DOL overtime laws, but it can also help HR managers improve productivity and efficiency, which can inform better labor decisions. With so many more employees potentially qualifying for overtime and the heightened focus on compliance, the new overtime laws should change the question for business and HR professionals alike from “whether or not to automate” to “when and with what technology.”
Jonathan Benhamou is CEO and co-founder of PeopleDoc, a leading provider of cloud-based HR service delivery solutions, which Gartner recognized as a “Cool Vendor” in the human capital management space. Benhamou helps young innovative companies and technology startups as a member of the delegation of Young Entrepreneurs of the G20. He has been recognized as a Technology Young Leader – an honor awarded by 20 of Europe’s top technology leaders, including Apple, Google, Oracle and Cisco.