Are you prepared for a labor increase?

winter

How the new overtime laws impact your organization

On May 18, 2016 the U.S. Department of Labor released the update to the Fair Labor Standards Act overtime rules. Simply put, starting December 1 2016, the classification for employees exempt from overtime will be raised from $23,660 to $47,476. This change makes millions of workers eligible for overtime when they work more than 40 hours.

For many procurement and supply chain leaders, this should be a consideration as we rapidly approach the budgeting season, not only for increased fee rates from service suppliers, but also for your department salaries. Many times to meet RFP, RFQ and project deadlines, staff will work into the night to get it done. While you may have had a comp time policy for exempt employees, now you could be paying time and a half or double time to get projects completed. There will be implications if junior staff travels for conferences, supplier visits or training and across a wide spectrum of work. You will need to think of the impact of all of these scenarios on your cost.

It is good to prepare now for this change. Here are some thoughts that may be useful in planning:

  1. If you have not automated the P2P systems and processes, this change could provide the economic justification that has not been available in the past.
  2. Review the exempt status of all employees.
  3. Analyze the current hours worked and salary implications of this change.
  4. Review the salary ranges for all job roles. Decide if some salaries should be raised, if job descriptions accurately describe the job role and if the compensation matches the responsibilities. I know, this is a HUGE task. If staff is consistently working more than 40 hours per week, is the headcount right?
  5. Look for opportunities to automate, reduce unnecessary work and increase productivity.

While these are some initial thoughts, I suggest you have a strategy session with your HR group to understand the company policy on the changing position for the cost of labor. If you haven’t done the analysis or the company does not yet have a position, the time to act is now.

Don’t let December arrive before you’re ready.

Winter is coming.

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