New Overtime Rule – Impact on Costs for Healthcare Providers

The new overtime rule is effective December 1, 2016.  The Department of Labor is instituting new overtime rules that are likely to have a substantial effect on health care providers everywhere.  (Here is a summary of the new overtime rule, courtesy of the Department of Labor.)  The projected overall effect of the new overtime rules is an increase of 4.2 million workers nationwide that will now be eligible for overtime.  Consequently, this rule has the potential to have a significant impact on the operating costs of health care providers.

Highlights from the new overtime rule

  • Increase the salary threshold for overtime eligibility from $455 per week ($23,660 annually) to $913 per week ($47,760 annually).
  • Every three years (beginning January 1, 2020) automatically update the salary threshold, based on wage growth.

Two additional features:

  • Raises the minimum level for highly compensated employee (“HCE”) from $100,000 to $134,004. (HCE’s are salaried white collar workers that for the most part, are ineligible for overtime.)
  • Allows employers to include bonuses, incentive payments and commissions (for non-HCE’s) up to 10% of the salary threshold.

Addressing the new overtime rule

First of all, health care providers should start planning for the implementation of the new overtime rule NOW.  December 1st will come faster than you think and proper planning will take some time.  Here’s some steps to think about:

  1. Identify which employees are likely to be affected by the new overtime rule.
  2. Review potential reclassification of affected employees.
  3. Consider wage adjustments to affected employees.
  4. Communicate any changes early on with employees.

You will need to evaluate the impact of the potential new overtime rule expenses for all affected employees versus the option of increasing their salary or hourly wage such that they exceed the threshold.  Be mindful that some states require you to provide advance notice to employees in the event of a pay rate change.  The notice period usually ranges from seven to thirty days.

While you are formulating strategy for the new overtime rule, you may want to consider doing some housekeeping items such as reviewing your wage policies, job descriptions and standards of performance.  In addition, it may be advisable to make sure that your hourly wage and salaried workers comply with the duties requirements associated with their status.

There are many other nuances associated with the implementation of the new overtime rule.  With adequate planning and execution, you can minimize the impact on your business, including legal exposure.  Take the steps outlined above now and be assured that you are prepared for the new overtime rule effective on December 1, 2016.

When you need proven expertise and performance

Craig Fukushima, NHA, MBA

Mr. Craig T. Fukushima’s health care experience spans more than 35 years with special expertise in the long term care sector, including implementation of innovative health care projects in domestic and international locations.

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