Pub. 6 2016-2017 Issue 3

10 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G C O L O R A D A N S R E A L I Z E D R E A M S Bracing for the Impact of Department of Labor’s New Overtime Rule A n additional 4.2 million salaried workers, including thousands employed by banks and other financial services firms across the country, will be eligible for overtime pay beginning Dec. 1 under a new rule finalized by the Department of Labor (DOL) on Wednesday, May 9. The new regulations increase the salary threshold for overtime pay to $47,476 a year, more than double the current threshold of $23,660. Intended to boost wages for low- and middle-income earners, the announcement wasmet with criti - cismby small-business owners and other employers concerned about affording higher pay for key staff members. “If this rule were supposed to help workers, it misses the mark,” said Rob Nichols, president and CEO of the American Bankers Association (ABA), in a press release. “It will be harm - ful to bank employees and the banks who employ them, and, as usual, smaller banks will be hit the hardest. As it stands, throngs of employees across the country, especially those at small banks and branches where a handful of employees wear many hats, will face reduced opportunity and flexibility in the workplace.” Of the 51 industries considered by the DOL, the banking in - dustry was identified as the secondmost “potentially affected.” With less than seven months to go until the rule takes effect, you may be wondering what you can do to prepare for its implementation and ensure compliance with the updated regulations. Fortunately, employers have various ways to comply with the new rule, but each option comes with its own set of issues: • You can simply elect to pay salaried staff (who earn less than the new threshold) time-and-a-half wages for each hour exceeding 40 per week. Alternatively, you can choose to boost some workers’ pay to the new threshold to avoid paying overtime. Both choices will increase your expenses and could upset your organi - zation’s overall compensation model. • You can limit affected employees to 40 hours a week, which would eliminate additional costs but possibly disrupt your operations. • You can assess the possibility of reclassifying em - ployees from salaried to hourly. Based on input from the business community at large, and the banking industry in particular, there is some expectation that reclassified employees may view the change in status as a demotion and/or lament the loss of flexibility that comes with being a salaried employee. A wide salary range for bank branch managers and other employees – depending on experience, branch size and location – means the new threshold could also result in the need to classify workers with similar job titles differently, further muddying the waters and affecting employee morale. • Though it subverts the intent of the new rule, some companies may opt to reduce the base pay of impacted employees to offset the cost of overtime payments. As a beginning step, you should start reviewing the compensation of existing exempt employees. By identifying workers who are paid less than the $47,476 threshold and determining the amount of overtime work those individuals are currently performing, you can start to figure out whether providing salary increases is preferable to the anticipated cost of overtime pay – assuming there’s no change in the number of hours assigned to those workers. Your due diligence isn’t limited to employees who earn a straight salary. Incentive plans awarded to loan officers or investment advisors who receive modest base salaries might also need to be re-tooled so that those workers retain their overtime exemptions. As you can see, the implications of the new rule are broad and are not only likely to cause administrative headaches, but also challenges in operations and employee relations. Neces - sary changes will require a careful and thoughtful approach, both in implementation and communication to your staff. The salary threshold will be automatically updated every three years, which means this isn’t a one-and-done proposition. To maintain continued compliance, you’ll need to regularly revisit these matters. n BY HUSCH BLACKWELL