Implementing the Changes in the Fair Labor Standards Act. Town Hall September 2016

Transcription

1 Implementing the Changes in the Fair Labor Standards Act Town Hall September 2016

2 What is the Fair Labor Standards Act? The Fair Labor Standards Act is a federal law which establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards affecting fulltime and part-time workers in the private sector as well as the federal, state, and local governments. Effective December 1, 2016, the federal government is increasing the minimum salary threshold to be classified as exempt to $47,476. The Department of Labor has added language to the approved final regulations to automatically increase the minimum salary threshold to be exempt every 3 years. The University is making these changes in order to comply with the federal law.

3 Current Exempt Employees Making Below the Minimum Salary Threshold of $47,476 Any exempt employee who makes below $47,476 (with the exception of teachers) will be transitioned from exempt status paid monthly to non-exempt status paid bi-weekly effective 11/19/2016. As of 11/19/2016 you are eligible for overtime or compensatory time. This change means that you will earn either overtime pay at 1½ your hourly rate of pay, or comp time for every regular hour worked over 40 hours in a work week. Regular hours do not include holiday, vacation, or sick time.

4 Common Payroll Cycles MONTHLY* Employees are paid in real time over 12 pay periods. Checks are dated the last work day of each month with direct deposits effective the day before the check date. No collection of hours or requirement to track and pay overtime time due to exempt status. BI-WEEKLY* Employees are paid over 26 pay periods. Payments are two weeks in arrears to allow for collection of hours worked, resolution of issues and processing of payroll. For example, work performed for the time period of 09/10/ /23/2016 is paid on 10/07/2016. Direct deposits are effective the day before the check date. SEMI-MONTHLY Employees are paid over 24 pay periods on the 1 st and 15 th of each month. Similar to bi-weekly, there is a delay in pay to allow for processing, etc. Work weeks are not consistent which creates complications in tracking/managing overtime/comp time. *Currently used by USM

5 Why can t the University continue to pay non-exempt employees on a monthly payroll cycle? There would be no system connection between hours worked with amount paid. There would be no way to track and pay for overtime hours worked.

6 Biweekly Pay has 26 Pay Periods How to calculate your gross, biweekly paycheck using example pay of $40,000 per year. Calculate hours worked per year: 40 (work week hours) x 52 (weeks in year) = 2,080 work hours per year Divide yearly salary by number of work hours per year: $40,000(yearly salary) / 2,080(work hours per year)= $19.23 hourly rate Multiply hourly rate by the hours in a pay period: 40(hours per week) x 2 weeks= 80 hours per pay period $19.23(hourly rate) x80 (hours per pay period)= $1, gross per check $1, per check x 26(pay periods in a year)= $40, *per year rounded up See example

7 Recording Time for Hourly Employees Departments who are not currently utilizing Time Clock Plus will complete a paper time sheet to be turned into their manager. Today the University has roughly 3,000 employees paid on a bi-weekly pay schedule Effective 11/19/16 if your department is not on the Time Clock Plus system you will fill out a paper time sheet and submit to your manager every pay period. Bi-weekly time sheets can be located at A tutorial on how to complete a bi-weekly time sheet can be located at If you are employed with itech, Physical Plant, Residence Life or Library you will need to speak with your manager regarding setup in the Time Clock Plus system.

8 How Will Transitioned Employees Be Paid? Bi-Weekly pay check dates for transitioned employees. November 30 th : paid for November 1 st 18 th in exempt position December 1 st : For individuals who need assistance, a loan is available to help bridge the gap in pay. The loan is 80 hours paid at the employee s hourly rate of pay. The loan must be paid back via payroll deduction starting with the pay period ending December 16, Employees will have two options for repayment of the loan: Option #1 Loan paid back over 40 pay periods. Loan will be paid in full by June 30, Option #2 Loan paid back over 66 pay periods. Loan will be paid in full by June 30, (Note: The loan is optional and only for people who elect to use it.) December 16 th : paid for hours worked/leave taken November 19 th - December 2 nd December 30 th : paid for hours worked/leave taken December 3 rd - December 16 th

9 Why is there a lag time with biweekly pay versus monthly pay? Actual hours worked must be tracked, collected and entered into the payroll system for hourly paid employees. Exempt employees are paid a monthly salary amount regardless of the number of hours worked. The University is currently utilizing a paper time sheet system, which extends the amount of time it takes to process a bi-weekly payroll. Processing hourly payroll includes the following: Distribution of time sheets Completion by departments Collection of time sheets Review for accuracy Resolution of errors, issues Data entry by payroll staff Processing of payroll Processing salary payroll includes processing of payroll only.

10 Loan Option to help Bridge the Gap The University is providing an interest free loan to employees impacted by the FLSA regulation changes. All employees who choose the loan will need to sign a Master Promissory Note. This form is due to HR no later than October 14 th. If you terminate employment the remaining loan balance will be due in full. Payment will be deducted from your last regular paycheck, or your unused vacation paycheck. The loan will be direct deposited on December 1, The loan amount will be your hourly rate of pay times 80 hours. (Example: Based on a salary of $40,000 this amount would be $1,538.47)

11 Options for Repayment of Loan Employee salary level of $40,000 Amount of Loan = hourly rate of $19.23 x 80 hours = $1, $1, can be payroll deducted over 40 or 66 pay periods opayroll deduction spread over 40 pay checks = $38.46 per pay period. Loan paid in full by June 30, 2018 opayroll deduction spread over 66 pay checks = $23.31 per pay period. Loan paid in full by June 30, 2019 Employees will have the option to pay off the loan earlier if they choose to do so.

12 If You Do Not Wish To Receive the Loan If you decline the loan you must indicate that on the Master Promissory Note and return to HR no later than October 14 th.

13 Possible Changes in Payroll Cycles In order to implement a change from a bi-weekly pay cycle to a semimonthly pay cycle, our current payroll system would have to be reconfigured. More research would be necessary, but this change would be considered a major technology project involving a project team comprised of both functional and technical staff. Due to the amount of effort involved and resources that would be necessary to make the change from bi-weekly to semi-monthly, we would not be able to meet the deadline of December 1 st for FLSA compliance.

14 Standard Deductions For All Payroll Cycles Including Bi-Weekly Deductions Taken From All 26 Paychecks: All Taxes Credit Union deductions If you currently have a deduction going to the USM Credit Union, you must make adjustments by visiting the Credit Union as this deduction will come out of each biweekly paycheck. Garnishments Retirement

15 Bi-Weekly Pay Deductions Taken from 24 Paychecks First Bi-Weekly Check of the Month Second Bi-Weekly Check of the Month Health Insurance ½ premium Accounts Receivable ½ monthly amount due Tax Shelter Annuity (403B and or 457) Life Insurance Health Insurance ½ premium Accounts Receivable ½ monthly due Alumni Association fees Dependent Care Reimbursement Dental Vision Parking Decal Payne Center United Way USM Annual Fund USM Foundation Medical Reimbursement

16 What If I Want to Work Over 40 Hours at My Job and I Don t Want to Be Paid Overtime? The federal regulations do not allow an employee to waive overtime pay. If you are working and you exceed 40 regular work hours in a work week, you must be compensated. Working includes utilizing electronic devices after your scheduled shift to answer s, return work related phone calls, etc. The law does relieve employers from recording time that is considered de minimis. De minimis is any time that is outside of the normal working schedule that is so insubstantial or insignificant that it cannot practically be precisely recorded. Example: Your schedule is 8-5, but your boss calls you infrequently after this scheduled time to ask you a question. The calls never last more than 10 minutes. The penalty to The University if we allowed an employee to work, and not be paid is $1,894 per violation.

17 Consequences of Non-Compliance For example there are two IHL institutions that have been fined monetary civil money penalties in the amount of $17,380. These institutions were also required to pay back wages in the amount of $119,000. Employee departments who willfully disregard regulations and university policy will be held responsible for monetary civil penalties and fines. Employee disciplinary procedures will be enforced up to and including termination.

18 Does My Manager Have to Approve Overtime? YES Your manager must approve overtime hours before they occur. You and your manager must come to an agreement before overtime occurs on whether you will receive monetary compensation at 1 ½ times your regular hourly rate, or whether you will receive compensatory time at 1 ½ hours for every hour worked.

19 What if I Work Overtime Without Approval? The regulations state that you must be paid at a rate of 1 ½ times your regular rate of pay, or credited compensatory time at 1 ½ hours for every regular hour worked over 40. Compensatory time is capped at 240 hours. The regulations also state that if the employer does not want overtime to occur they have the duty to take action to ensure that overtime hours do not occur if they are not authorized.

20 Where Can I Locate More Information? The Fair Labor Standards Act section of the HR website has a wealth of information on topics such as: Frequently asked FLSA related questions Guidance on travel for non-exempt employees On-call hours fact sheet for bi-weekly employees In October Human Resources will offer training sessions for affected employees and managers. Topics will include properly recording time, tracking and managing comp time, traveling with non-exempt employees, and other topics.

21 What should you do to prepare for the change? Plan ahead for new gross pay. Decide if you will take the loan that is being offered. Make adjustments to automatic withdrawals from your accounts to align with the new pay schedule. (Example: automatic drafts or bill due dates)

22 Questions Please send all FLSA related questions to